Posted inForum Q&A

Three AM views on the next big worry

At the FSA Growth Forum in Hong Kong, Capital Group, Investec and M&G weighed in on what a Donald Trump presidency would mean to the markets.

At yesterday’s FSA Growth Forum, the Trump risk question seemed to be on the minds of fund selectors, who wanted to hear what the speakers thought.

It should not be a surprise that the Asian investment community is clearly concerned about the US presidential election. According to FE Advisory Asia, around 80 equity funds for sale in Hong Kong are specifically focused on North America. That doesn’t count the substantial weighting that the US gets in global equity and fixed income portfolios.

But the election impact will be even wider. The Economist Intelligence Unit warned in its recent report on the top ten global risks that a Trump victory in November could disrupt the global economy.  (Curiously, Brexit did not make the top ten global risks).

The views of the speakers on the market impact of a Trump presidency are more or less in agreement:

It’s too early to say. Trump has made some strong statements that are difficult to back down from. He’s got an objective and will do more or less whatever it takes to get to that objective. But — he’s also got a shameless track record of going back on things he said previously. What is important is what we see over next six months as he builds a team of advisors around him and comes up with credible economic policies. Even with everything I’ve just said, it’s hard to see Trump coming into power and not having at least a short term negative impact on stock markets.

Andy Budden, investment director at Capital Group


A Trump presidency will clearly be bad for markets over the short-term. There is always a tendency for strong [political] positions to be dragged to the center once somebody is actually in power. The worry is that if he gets into power he will have won it on the back of disenfranchised middle America and they’re not going to accept that he suddenly re-negs on all his promises. He will have to follow through on some of them. Will he build a wall on the US-Mexican border? Probably not. Will he apply trade sanctions on China? Absolutely, yes. That has global ramifications that is going to hit markets.

Justin Simler, investment director of the multi-asset team at Investec Asset Management


It’s a little bit difficult to judge what the impact his economic policy would have on [market] fundamentals because he hasn’t really stated any economic policy, only popular sentiment. He hasn’t laid out what he’s going to do. He has certainly said a lot of things, but what actually gets implemented remains to be seen. Yes, you get a sense from the markets that investor sentiment would be negative in response to a Trump victory. But you can also ask what does that mean, for example, for US government bonds if he suddenly engages in massive fiscal expansion because he wants to build up the military or build a [border] wall and it’s the US government paying. What does that mean for the US debt situation as well? There are all sort of things that could happen as a response to that.

Craig Moran, deputy fund manager, M&G Investments

Part of the Mark Allen Group.