Aviva Investors has identified Donald Trump’s election as the trigger of “the biggest change in global market sentiment since the global financial crisis”. Investors have clearly been buying into Trump’s promise to increase GDP growth to 3.5-4% per year in recent months, even though the orange one has so far provided precious little detail on how he is going to achieve that.
Filling in the dots
Investors, though, haven’t found it problematic to fill in the dots for Trump. A scan of the 2017 outlooks of the major US and European asset managers shows there is a strong consensus that a combination of deregulation and a shift from monetary to fiscal stimulus will drive GDP growth, especially in the US but possibly also elsewhere.
Meryl Streep, one of the most over-rated actresses in Hollywood, doesn’t know me but attacked last night at the Golden Globes. She is a…..
— Donald J. Trump (@realDonaldTrump) January 9, 2017
“Significant tax reform is a potential game-changer in the US and would support developed market equities in 2017, with increased infrastructure spending boosting industrials and materials,” said Ian Pizer, head of investment strategy at Aviva Investors. Aviva expects “the global economy to expand in 2017 and 2018 at its fastest pace since 2011, particularly if other countries join the US in the adoption of more expansive fiscal policy”.
The Swiss asset manager Lombard Odier can see this happening. “We expect Europe’s moderate recovery to continue and it could even improve in the event of fiscal tail winds,” said its CIO Jan Straatman.
Schroders, which sees a “positive impact” of monetary easing in Europe, is also upbeat. The London-based asset manager expects “the current cyclical upswing to continue into 2017, as ongoing economic improvement is bolstered by proactive fiscal policies”.
Cause for caution
The asset manager buoyancy contrasts somewhat with the macroeconomic outlook of fund buyers. Macroeconomic sentiment across Europe has only improved marginally compared to October. The majority of Europe’s fund buyers retain a ‘neutral’ macroeconomic outlook. Only in Belgium, Norway and Switzerland, bulls are in the majority.