The growing support for anti-establishment candidates like Donald Trump and Senator Bernie Sanders will increasingly translate into higher degrees of market volatility. Josh Emanuel, chief investment officer at Wilshire Funds Management, said investors should consider underweighting equities in response to the political uncertainty. ‘We have to appreciate that what is happening today has created a great deal of uncertainty,’ said Emanuel. ‘As opposed to having candidates that are starting from the center and moving to the left or right from there, you have extreme anti-establishment movements.’ Emanuel said equities are exhibiting higher than normal valuations on a forward earnings basis, on top of below average earnings growth and heightened volatility. He said the trend in both estimated and actual earnings growth remains materially negative, as the market is now witnessing the third straight quarter of negative earnings growth, also known as an ‘earnings recession.’
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