With Donald Trump emerging victorious in the US presidential race, many investors may be thinking: Now what? Here, Ed Perks, CIO of Franklin Templeton Equity, and Christopher Molumphy, CIO of Franklin Templeton Fixed Income Group, offer their initial take. One thing they agree on: there could be continued market volatility ahead.

The outcome of the US election likely contributes to continued equity market volatility, in our view. President-elect Donald Trump’s campaign clearly struck a nerve with many Americans, reflecting what some might characterize as a disenfranchisement with the current state of the US government. His appeal as an outsider, a person who could bring a different voice to Washington, implies change, and with change comes uncertainty. The previously maintained balance of power between the executive and legislative branches now rests with the Republican Party. This may result in more significant policy shifts over the coming years.

Though US equity markets have demonstrated resiliency since the global financial crisis, political challenges in the United States (e.g., sequestration, tax reform, general gridlock) and abroad (e.g., eurozone crisis, the United Kingdom’s referendum to leave the European Union) have contributed to bouts of market volatility, and we believe this event will likely have the same effect. During the past eight years, we’ve found that the underlying strength of the US economy supported by positive corporate and consumer fundamentals has been a key driver for value creation. We believe the health of the US economy, in concert with corporate earnings and dividend growth and consumer employment and spending trends, should be a significant factor for future market returns. However, it’s important to recognize that Trump’s trade agenda could alter the path to growth for multi-national corporations, casting doubt into many investors’ minds about the sustainability of market resiliency. What remains to be seen is where the new administration will focus their efforts and how the policies will take shape. Our role as active managers is to discern where these potential impacts might create risks and opportunities for our clients.

In the months and weeks leading up to the US election, our teams had been evaluating the potential policy implications of both candidates to inform our views about where different sectors of the market may be impacted. Sectors potentially facing regulatory changes or systematic government policy changes may be most subject to impacts by the new administration. One of the foremost examples is health care. At a higher level, it remains to be seen whether the Republican Party’s call for a repeal of the Affordable Care Act will gain traction. As well, many drug companies within the health care sector have been under pressure in recent months on market concerns that a new administration could enact sweeping legislative efforts to rationalize drug pricing, which could negatively affect pharmaceutical and biotechnology companies. Our analysts believe these risks, in large part, are reflected in valuations and that regulatory and legislative actions likely won’t live up to the negative expectations that currently exist.

Financials are another sector subject to impacts from a change in administration. Since the global financial crisis, the regulatory environment for financial services firms has changed dramatically; thus we don’t expect major changes to policies under the new administration. Trump’s campaign rhetoric was more supportive of financials; we would expect him to generally make more business-friendly political appointments, for example. In our view, a bigger risk to the sector stems from the broader economic destabilization that could result from his proposed trade policies.