According to JPMorgan research, few investor types have successfully captured the so-called Trump trade. Whether it's for hedge funds, real money managers or retail investors, the market moves since the U.S. elections have been both "big and surprising."
Investors needed to be positioned long the U.S. dollar, long U.S. equities and short emerging markets to cash in.
In fact, 2016 as a whole has been a schizophrenic year, and a difficult one for most investors to negotiate. Remember January? It felt like markets were in free-fall. With economists fixated on "secular stagnation" and central banks "still" engaged in keeping interest rates low. Prospects for a year of low single-digit returns appeared baked-in.
But never has the phrase "expect the unexpected" been more relevant — and even more so to investor resilience. There has been something admirable, and yes, resilient about the way markets have dealt with political challenges this year.
In the capital markets context resilience in 2016 has been about facing down event risk: Brexit, the Trump election win, and the "no" vote in the Italian referendum. In each case, the market "consensus" argued for a halt to the risk-on trade, and equities (the ultimate risk-on trade) to fall in value. The arguments made a lot of sense: The 35-year-long bond bull market is ending; equity valuations are too rich; the Fed is set to hike interest rates; global debt is too high; inflation is just around the corner … and so on.
I'm not saying these arguments don't matter – at some point they will do, and we will have the kind of economic scorched earth that makes the Global Financial Crisis of 2008 look like a financial crisis on training wheels. But until then stiffen that upper lip, pull back the shoulders, puff out the chest. Hold the look. Markets are making new highs.
So what to do?
The problem is the unexpected is not what it used to be!
Every year Saxo bank produces their Top 10 Outrageous Forecasts. The headliner for 2017 is that China's gross domestic product swells to 8 percent and the Shanghai Composite hits 5,000. (you can read the full list here) Given the nuclear codes have just been handed to a man who used to say "you're fired" on reality TV, who am I to say these things won't happen. Maybe Saxo Bank should change the title on its list to 10 things that are moderately unlikely to occur, although that's not as eye-catching.
If you want to run with the Trump trade next year, buy companies that will benefit from the new president's supply-side agenda of tax cuts and deregulation says CNBC regular Jean Medecin, member of the investment committee at Carmignac. Medecin says you need to own oil services groups, and other beneficiaries of reflation. He likes Japanese banks on a valuation trade.
But he also has some good advice for the resilient investor – be opportunistic and selective around sector- and stock-picking. Good risk management means acknowledging markets are increasingly unpredictable, and therefore consider taking profits early.
Big bank market strategists are beginning to get more positive on equities in 2017 as they are lured in by new all-time highs in the U.S. The consensus is shifting to a better year for owners of stocks. But as Saxo Bank points out: "It is important investors are aware of the range of possibilities outside of the market consensus so they can make informed decisions, even in seemingly unlikely market scenarios."
Best of luck for the markets in 2017 – the resilient investor who understands not all swans are white should have nothing to fear!
Geoff Cutmore is co-anchor for CNBC's flagship program Squawk Box in EMEA. You can follow him on Twitter @geoffcutmore.
The National and CNBC are global content sharing partners. This article originally appeared here.