Investors should exercise caution and avoid making immediate portfolio adjustments in response to the inauguration of Donald Trump as US President, wealth experts have warned.

While the US stock market initially responded favourably to Trump’s election last November, recent headwinds have “curtailed” some of the Trump-related gains, said AJ Bell investment analyst, Dan Coatsworth.

“The S&P 500 index of US shares is now trading 1.2 per cent higher than election day, while the more tech-focused Nasdaq index is up 3.7 per cent,” Coatsworth continued.

“Initial euphoria was driven by investors locking onto the fact Trump is pro-business and is expected to cut taxes and have looser regulation, potentially giving a boost to corporate profit margins and driving greater share buybacks.

“There is a big risk that investors have now priced in a lot of potential good news and that markets don’t do as well once Trump is back in power.”

Meanwhile, St. James’s Place senior investment specialist, Nina Stanojevic, said that despite the uncertainty surrounding the future direction of the new administration, investors should avoid making any immediate portfolio adjustments in response to this political development.

“Historically, markets have shown resilience across political transitions,” Stanojevic stated.

“Reacting to short-term political shifts introduces unnecessary risk and often undermines long-term returns. Investors should remain disciplined and avoid reactionary moves that could detract from sustained growth.”

Stanojevic highlighted several key developments that could shape the financial landscape in the coming months: policy direction and fiscal stimulus; regulatory changes; global trade relations; economic recovery and inflation trends; and monetary policy.

“Within this environment, we see compelling opportunities in historically underperforming asset classes like small-cap stocks and emerging market (EM) equities,” she continued.

“Small caps are trading at exceptionally low valuations, which places them in a positive position for strong rebounds.

“Similarly, EM equities are poised for growth, with compelling valuations supported by structural trends such as urbanisation and favourable demographics.

“Additionally, bonds continue to offer attractive yields and defensive qualities, serving as a vital counterbalance to equities amid market uncertainty and volatility.”

However, as Trump begins his term, Stanojevic warned that the potential for unexpected policy shifts and geopolitical developments increased the risk of extreme market events.

She argued that, in this environment, broad diversification should remain a cornerstone strategy - not just for protection against volatility but also for capturing mispriced investment opportunities that support long-term growth.

GSB financial adviser and partner, Vince Truong, said they were already seeing the impact the Trump administration will have on global markets.

"US equities are a whirlpool sucking assets away from other countries as market participants largely expect pro-growth policies in the US,” Truong stated.

“This is one among other reasons why US equities outperformed last year, and especially post-election.

“Moreover, the US Dollar is strengthening as assets move into the US and trade in the US. It’s also in anticipation of potentially higher tariffs, leading to higher inflation, leading to higher interest rates and thus a strong dollar. So, the market is frontrunning these events.

“The impact of higher tariffs on the investment markets will depend on how gradual and surgical they are. If they’re a sudden sledgehammer, that will have at least a short-term negative impact, likely causing a dip or correction (5-10 per cent drop).

“But if they are surgical, measured and gradual, then the impact should be nominal. As we don’t know the nature of the tariffs it would be best to temper excitement during what will be a period of short-term volatility to better assess what actually gets enacted."

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