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‘Brexit all over again’: Industry reacts to Trump presidency

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Donald Trump’s victory in the US presidential election has been called “Brexit all over again” as investment firms warn of an environment of unprecedented political risk.

Trump was declared the winner of the election after the results had come in from 45 of the 50 states.

Investment firms have reacted warily with M&G Investments macro fund manager Eric Lonergan saying the result is like a repeat of Brexit and shows a surge in anti-establishment sentiment.

Lonergan says: “The critical unknown is whether a Trump presidency pursues the policies of Trump the candidate, in particular his anti-trade, anti-China and anti-Mexico policies. Reason suggests that Congress and financial markets will regulate his ability to act. It is equally possible that these campaign rally cries are abandoned with the responsibility of power. But the real concern is that he will do what he says.”

Fidelity International global equities chief investment officer Dominic Rossi adds: “We are heading into a world of unprecedented political risk which calls into question the pillars of the post WWII settlement. It’s unsurprising investors are heading for cover. The immediate sense of bewilderment at the shift rightwards in American politics will need to give way to a more sober risk assessment.”

Rossi says the immediate impact with be on the Federal Reserve with the likelihood of interest rate hikes in December and next year falling.

He says: “The dollar which has been trending higher in anticipation, has consequently reversed. Both were threats to the bull market, and these have now been postponed. Monetary policy will remain accommodative.”

Rossi adds: “However, these known financial risks have been displaced by an unprecedented level of unknown political risks. We can only speculate whether Trump will follow through on his more protectionist slogans with substantive policies. Investors, particularly those overseas, will stand back and wait.”

Miton US opportunities fund manager Nick Ford considers that any “knee-jerk” sell-off is likely to be short-lived.

He says: “We suspect there is a considerable amount of money on the side lines that will be looking to “buy the dip”. Sectors that should do well once the dust settles include financials and consumer cyclical stocks. Trump is known to have opposed further regulation of the banks which have recently had to curtail lending following more onerous capital requirements during President Obama’s tenure.”

Ford adds: “Any sense that capital ratio requirements might be relaxed could give the sector a shot in the arm. Trump’s plan to reform the tax code and aggressively cut both individual and corporation taxes should boost consumer spending and business investment assuming he can come up with a credible plan to finance his proposals. This is a good backdrop for retailers and restaurants which would also escape Clinton’s plans to raise the minimum wage which is paid to many employees in the sector.”

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Comments

There are 14 comments at the moment, we would love to hear your opinion too.

  1. Closer to home the Trump win is bad news for the established elites and bureaucracies in the EU as it will spur on the movements of the likes of La Pen in France. Germany and France have major elections in 2017 and there are anti EU movements in probably half a dozen member states.
    Could be useful to the UK in the ‘Leave’ negotiations as long as the ‘remainers’ allow those negotiations to proceed without tying the negotiators hands.

    • Agreed – I think political leaders in EU member States may well find themselves becoming a tad anxious as reality hits home that the times they are a changing, to coin Bob Dylan’s song. Mind you as an institution, the EU don’t always care about results as they sometimes insist on a re-run until they get the result they want. Sometimes they just ignore the result and carry on regardless. I do think this time, it may be somewhat different

  2. No way as bad as Brexit. They can choose someone else in 4 years. We can’t change if we leave.

    Politically – Rednecks of the world unite.

    Financially – A buying opportunity?

  3. There have been three financial shocks to markets this year. Trump, Brexit and the Chinese economic slowdown. Trump is a blip (so far), Brexit was a few bad days. China, however, was weeks of uncertainty and steep falls in all asset classes (except Gold and other precious metals). I just hope Trumps threats to put barriers to trade up for China are never realised, in that scenario no one will win.

  4. Deja Vu?

    Woke up at 3am, switched on the TV could not get back to sleep!

  5. @ Marty Y
    I reckon Harry Katz knows exactly what he meant to say. This is the stupidest phase of international politics in my lifetime. A lot of the people that voted for some of these changes may be the worst to suffer the consequences of them. Nasty feeling in this country now.
    If I put an English flag up, outside the office it would, likely, stay there. If I put an EU flag up it would, likely, be torn down sharpish.
    Jingoism reigns.

    • I am feeling somewhat like I did in summer 1988 shjorlty before the Berlin Wall came down and also like I did in summer 2001… I am now feeling ratehr uncomfortable and wairting to hear something on the news about the Baltic states. Don’t forget we only announced last week we’d be sending extra British NATO forces there along with many other NATO countries.
      In 1988 we still had Challenger Tanks in Germany and the Americans had their charger tank battalions in storage ready to fly out the crews. Now we have ……..fill in the blanks……………………………………………..
      Then we have another wall due to be built with Mexico being forced to build it!
      What about our extradition treaty with the US which means you don’t even have to have been convicted of a crime or ever ENTERED the USA and you can be extradited!!!!!
      Will Trump now put Hilary in jail as he threatened if he got in to power?

  6. I couldn’t believe the Brexit result and now this! Well it is amazing how things work out?!

  7. Protectionism and tariffs will do nobody any good in the long run. You simply can’t uninvent planes, trains and automobiles (…despite what DAESH would wish). Neither would individually negotiated trade agreements between hundreds of nations.

    Not very good for the performance of businesses, their share values and your client’s investments portfolios, eh? I’m pretty sure that explaining that away would be a less than pleasant experience.

    I have nothing against protest votes per se however, I wish electorates were a little more discerning in which elections/referendums they were going to exercise their democratic rights. Preferably the ones that don’t let the lunatics take over the asylum. Still, those of a certain age will remember Paul Weller singing… “The public gets what the public wants…”

    Perhaps I might go underground as well!

    • I well remember it and UB40’s 1 in 10 which resulted in me deciding to take the first job I applied for/was offered when I decided I would leave 6th form early for a job rather than get a degree and then perhaps not get one after all the study.
      We live in interesting times….

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