Peter Hensman, Global Strategist for the Real Return team at Newton Investment Management “Contrary to polling expectations, and reminiscent of the UK vote for Brexit, Donald Trump has won the US Presidential election as those feeling left behind by technological change and globalisation registered their discontent and desire for a different approach. Markets reacting with shock to the outcome as the uncertainty around quite what a Trump Presidency stands for reverberates around the world.
“As the dust settles, the prospect of lower corporate tax rates and reductions in income taxes should be viewed positively and markets will look to understand more about the Trump plans for a significant increase in infrastructure spending. How deliverable these campaign promises are in the light of the breakdown in relations between the new President and his Republican party colleagues will also receive a significant amount of attention.
“Unsurprisingly, emerging market stocks and currencies have reacted to the election result, as the world faces the prospect of a more insular US leader. More US dollar strength relative to emerging markets seems likely as US capital retrenches from the rest of the world. The uncertainties unleashed by this election outcome are likely to derail the much anticipated US rate increase at the December FOMC meeting. US political uncertainty and the lowered prospects for tighter monetary policy can be expected to undermine the dollar against the other major currencies, the Japanese yen perhaps stands out as the currency most likely to benefit from this flight to quality.
John Bailer, Senior Portfolio Manager, The Boston Company Asset Management “With Trump’s election, we expect markets to pull back due to short-term uncertainty. However, it’s not a reflection of the fundamentally sound US economy. The US has full employment and rising household formations, which has positive knock-on effect for other sectors. When coupled with low inflation, we believe the US economy can grow at around 2% without overheating.
“Of course, it’s impossible to say at this point how any of the new president’s plans might work out in practice, but overall, we feel much of what was said in the run-up to the election was more rhetoric than reality.
“We believe the composition of Congress is as important as the President for economic policy. A victorious Donald Trump with a Republican congress will be conducive to business-friendly policies.”