Investors must continue to focus on the long-term fundamental picture, following the US presidential election results and from that vantage point, “America is looking golden,” Julian Howard, chief multi-asset investment strategist at GAM Investments, has said.
Reacting to the news that Donald Trump has won the US election, Howard said the immediate market response chimed “quite a bit” with long-term analysis, but that was not consequential as it was the long-term picture that investors needed to keep in mind.
“The US economy has quietly been doing well and US corporate earnings look to be in good shape,” he said.
Financial markets reacted to the Trump victory with a rise in US yields, the US dollar and equity markets, while emerging market currencies sold off and short-dated euro yields were dented.
Thomas Hempell, head of macro & market research at Generali Asset Management, said that although Treasury yields were skewed to the upside now, the asset manager would be looking for buying opportunities this autumn “as the market’s pricing of the Fed equilibrium is starting to look stretched”.
Emerging market views
Some asset managers commented on their investment plans in the wake of Trump’s win.
Michaël Nizard and Nabil Milali, head and portfolio manager, respectively, of multi-asset and overlay at Edmond de Rothschild, said the investor was reducing its investments in emerging markets globally, “while maintaining a more constructive view of China, where the coordination of fiscal, budgetary and monetary stimulus could support this zone”.
“We are also maintaining our neutral stance on equity markets, in a period marked by increased volatility in interest rates and geopolitics,” they added.
At Vontobel, chief investment strategist Stefan Eppenberger said the asset manager had so far decided not to make changes to its asset allocation.
“Amid high economic uncertainties, we remain neutrally positioned on equities, with an overweight in gold and an underweight in bonds,” he said. “Within bonds, we prefer emerging market bonds over high-yield bonds.”
At Ninety One, emerging markets equity portfolio manager Archie Hart said longer-term emerging market performance still depended “on the complex interaction between economic growth, currencies, interest rates and geopolitics, with much of this being anchored on longer-term economic trends”.
“The American president is a very powerful figure, but we suspect the laws of economics may prove even more powerful in the long run,” he said. “In the medium-term, market performance will be driven by policy implementation and execution, much of which is still to be determined.”
Climate change momentum
For many, Trump returning to the White House raises questions about the fate of the sustainability agenda, not least because he previously withdrew the US from the Paris Agreement.
Nazmeera Moola, chief sustainability officer at Ninety One, said the fresh Republican victory is likely to see the US retreat from all global climate initiatives, which would slow momentum to combat climate change unless other parts of the world stepped up to fill the gap.
However, she also said the asset manager expected that countries like China and India would continue to focus on energy transition-related investments as these have been driven by economics.
“Other considerations,” she added, “include the impact of the prospective tariff hikes on the cost of new renewable projects in the US and the likely expansion of oil and gas exploration on federal lands as environmental regulation is rolled back.”
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