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Which funds could benefit from Trump?


Fund investors should look to the North America and infrastructure to benefit from the US presidency under Donald Trump, The Share Centre says ahead of his inauguration today.

Trump’s fiscal stimulus plans have been welcomed by stock markets with the S&P 500 rallying 7 per cent since his election, while the Dow Jones Industrials has returned 9 per cent.

The Share Centre head of investments Andy Parsons lists the Miton US Opportunities and First State Global Listed Infrastructure funds as his top picks to play the US presidency.

Since November 8 the funds have returned 9.3 per cent and 1.8 per cent respectively, according to FE data.

On healthcare, the Axa Framlington Health fund, which has a natural weighting towards the US, had been one of Parson’s picks several weeks ago, but recent comments by Trump on the sector had prompted him to reassess that.

Last week healthcare stocks took a hit when Trump told a press conference that pharmaceutical companies were “getting away with murder” with their high drug prices.

The fund has returned 5.3 per cent since the US election.

Parsons says First State Global Listed Infrastructure fund is global, but that half its weighting is in the US.

“Our view is that most developed economies have significantly under invested in their infrastructure,” Parsons says.

“To remain competitive, economies such as the US, have to invest to update their infrastructure to enable more reliable, efficient strategic assets like road, rail, sea ports, gas, electric and water utilities.”

Is the ‘Trump trade’ honeymoon over before the wedding night?

Over the next 100 days markets will start to see whether Trump can deliver on his fiscal promises, with the ‘Trump trade’ – long developed market equities and short government bonds – already losing steam ahead of his inauguration.

Equities are discounting a significant growth pick up without meaningful monetary tightening spoiling the show,” says Nordea Asset Management senior strategist Witold Bahrke.

Bahrke says markets seem to have “priced to perfection”, but warns their optimism is at odds with the uncertainty that Trump represents. 

Take the bond market: the spread between European and US interest rates has risen to the highest levels since the 80s. To justify this, we probably need US growth to head back above pre-Lehman trend levels in the near future – which would require the absolute success of ‘Trumponomics’.”

Bahrke continues: “At the same time, policy uncertainty is extremely elevated, not least caused by conflicting signals from the incoming US government.”

Head of equity strategy at stockbroker Interactive Investor Lee Wild, who notes Trump will become president just after City traders switch off their screens, wonders whether the honeymoon will be over before the wedding night.

“It’s when nervous investors, already sitting on fat profits after a stunning run since the US election, worry that Trump could start doing real damage.”

Wild says: “Traders have already taken some money off the table, and markets are undeniably jumpy. But despite some selling, no one wants to call this rally over prematurely, and indices remain near record highs.

“Even the pros don’t know which way this will go, near-term at least.”

While companies in the US could enjoy favourable conditions in the short-term, Hermes Investment Management head of global equities Geir Lode says he is concerned that at any moment a stray tweet may cause markets to plummet or diplomatic relations to sour.

So far, companies have been seeking to appease Trump by committing to investments in the US or in the case of Boeing promising to lower the cost of the Air Force One.

But Lode says: “We remain sceptical that social media will be the best vehicle for negotiation and suggest that some issues require more than 140 characters (even if they are capitalised).

“Trump’s policies seem likely to risk a trade war and his indelicate approach to negotiation does nothing to suggest this can be avoided. Those commentators who expected Trump’s advisers to moderate his outlook have so far been proven wrong.”


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