The recent US election results have caused significant waves across the investment landscape, with fund managers expressing differing opinions on its potential impact.
While some believe there are opportunities for growth, others point to increased uncertainty.
Sustainability
According to Nazmeera Moola, head of sustainability at Ninety One, the Republican victory could signal a U.S. withdrawal from all global climate initiatives, as was seen during the first Trump presidency.
Yet Moola believes that while a red sweep is “net negative for climate considerations,” a blanket repeal of all elements of the U.S. deal Inflation Reduction Act, adopted in 2022 to support clean energy initiatives, remains doubtful.
“Other considerations include the impact of possible tariff increases on the cost of new renewable energy projects in the United States and the likely expansion of oil and gas exploration on federal lands as environmental regulations is repealed,” she said.
Australian stocks
Australian businesses are also likely to be hit by Donald Trump’s pro-US growth and inflation policies, observed Chris Haynes, head of equities at Equity Trustees Asset Management.
“The combination of deeper tax cuts, higher government spending and the prospect of significant tariffs is likely to keep inflation high and slow the pace of interest rate cuts,” he declared.
In particular, companies with exposure to the US dollar are expected to benefit from a business-friendly administration and a stronger US dollar, such as Macquarie, Computershare and CSL.
However, other segments of the market, such as Australian commodities, could bear the brunt of an “aggressive push from the US and China”, impacting companies like BHP, Rio Tinto and Fortescue, Haynes said.
US stocks
Simon Webber, head of global equities at Schroders, said the fund manager remained bullish on US stocks 12 months ahead, given that corporate tax cuts and deregulation could prove supportive.
“A Trump victory carries some risks for business profitability, as tariffs could hurt profit margins in some sectors that still rely on products imported from China. At the same time, the expected crackdown on immigration could boost wage growth, particularly in the consumer and construction sectors,” he said.
“These are inflationary dynamics. Companies with pricing power [the ability to raise prices without denting demand] should fare better in this environment, although demand destruction may be a feasible scenario.
Trump’s proposed corporate tax cuts and deregulation will also be an obstacle, supporting areas such as big banks and artificial intelligence, Webber added.
For his part, Tim Murray, capital markets strategist at T. Rowe Price, agrees that US small caps could benefit from Trump’s victory, especially if the administration rolls back regulations and adopts a more flexible stance on mergers and acquisitions.
“Small businesses have been cautious ahead of the election, so clearer policy could encourage them to restock their inventories and increase spending. The possibility of further corporate tax cuts and monetary policy easing by the Fed would also provide a tailwind,” he said.
Yields
As the resolution of uncertainty and the positive growth implications of the election results led to significant gains in U.S. stock markets, the U.S. dollar and Treasury yields, Stephen Dover, director of the The Franklin Templeton Institute, warned of the potential risk of rising bond yields. yields.
“The main risk to US and global stock markets is rising bond yields. To the extent that higher yields reflect stronger growth expectations, the result is less problematic,” he said.
However, to the extent that they reflect rising inflation expectations or a crowding out of investment due to large projected budget deficits, higher yields “could cap overall stock returns.”
Chris Iggo, chief investment officer for core investments at AXA Investment Managers, highlighted how the market response to Trump’s victory is a “repeat of 2016”, with higher yields bottoming out in September only to rise by 62 basis points on election day.
“If the 2016 pattern is to repeat itself, then we could be looking at yields rising by around 100 basis points more over the next two years, which would give a nominal yield of around 5.5 percent,” he said. said Iggo.
However, he also noted that the 2016 trend saw yields “not really risen much” after the initial post-election jump.
“Between late November 2016 and November 2017, the total return of the ICE BofA U.S. Treasury Index was 2.0 percent. Yields actually fell for part of this period,” he said.
Currencies and commodities
Also reflecting on Trump’s victory in 2016, Global ‘infrastructure.
“This could happen again with a Republican-led administration supporting the dollar, particularly in trade-exposed regions,” he said.
Oil also rebounded after the 2016 results, benefiting from Trump’s pro-energy stance, which favored traditional energy sectors.
For Global
However, he warned that external risks, such as OPEC decisions and China’s slower economic recovery, could “limit oil’s upside potential” even with U.S. policy support.
The fund manager also flagged potential fluctuations in gold prices amid Trump’s pro-growth policies and renewed fiscal stimulus.
“Nevertheless, pricing and geopolitical uncertainties could intermittently support gold demand as a hedge,” Global X said.
View the macro as a “tool”
At the same time, fund managers like GQG have pointed out that macroeconomic events like elections can instead offer “a better understanding of the rules of the game”, noting that when it comes to the United States, given that it- These have been relatively stable, “whoever is in the game “The White House usually doesn’t matter”.
“If we look at over 50 years of data, going back to the bygone era of 1969, in the absence of a major economic decline [and generally multiple declines]U.S. stocks, as measured by the S&P 500 or MSCI USA Index, have generally been rising. We now know that past performance is no guarantee of future success, so things can obviously change,” said Josh Snyder, GQG global investment strategist.
Ultimately, the fund remains more focused on “preparation rather than prognosis,” he explained.
“Our view is that benefits are like gravity. Show us where the profits are going and ultimately we think the price will match that. To the extent that potential policy changes, from tax cuts to regulatory changes or the implementation of tariffs, actually impact earnings growth, we will react to the data.
“At the same time, if short-term headlines increase volatility for stocks whose fundamentals we believe are unchanged, we are happy to harvest that volatility as well.”
He added that investing “is about adjusting the sails” rather than predicting the wind.
“For us, the biggest risk to a business is often the execution rather than the election,” Snyder said.
