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Is a Trump presidency the best outcome for investors?

“A Trump win would be seen as dangerous outcome by many, but he would probably be more pragmatic than people now think he will be,” said Adrian Brass, manager of the Majedie US Equity Fund, addressing a crowd of fund selectors at the Expert Investor Stockholm forum last week.

Brass reminded the audience that Hillary Clinton’s plans for stricter regulation of the healthcare and finance sectors would be detrimental to companies active in these areas. Though Trump has promised to crack down on a lot of things, S&P 500 companies are not among his intended targets. On top of that, Trump’s tax plans are also a lot more beneficiary to the economy than Clinton’s, said Brass. As you can see in the chart below, Trump has planned tax cuts worth over $10trn (€8.9trn), while Clinton plans to increase the tax burden of some US companies.

Show me the money

However, this is where the shoe pinches, noted Randeep Somel, manager of the M&G Global Basics Fund. “What worries me is that none of his spending is costed,” he said. “If he gets his tax and spending plans through, none of which is costed, we’re likely to see weakness in the dollar,” he added.

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It’s however not likely Trump would manage to do that, as Republican hawks would not be likely to vote along with a Trump budget involving large-scale lending to fund election promises of a candidate they didn’t particularly like in the first place.     

A clear negative of a Trump presidency to the US economy would be his plans to repeal trade deals. But these plans are also likely to be resisted by a Congress supportive of free trade.

Therefore, it may not make that much of a difference whether Trump or Clinton will win the presidency, concluded Holger Wehner, a member of the European equity team of Allianz Global Investors, who in fact placed a bet on Trump winning the November elections back in February.

“Perhaps we should learn some lessons from the Brexit vote in run-up to the elections,” he said. “After Brexit, markets took a dive and volatility increased for two weeks, but markets have recovered since. Therefore, I believe that markets will cope with whatever outcome of the elections. If you are long-term investor, you might as well look through it and ignore all the election noise.”

It seems, however, that the audience hasn’t yet learnt Wehner’s lessons. Two thirds of Swedish fund selectors believe a Trump win will negatively impact global markets, while only a third think it won’t make a difference. And indeed, only one attendee believes President Trump will actually beneficial to equity and bond markets.   

A sure thing, however, is that a Trump presidency would lead to a very high degree of policy uncertainty in the US. This would give the Fed a very good reason to hold off from hiking rates for the foreseeable future, and pursue an accommodative policy, weakening the dollar. This uncertainty could also have a negative impact on growth and investment. In short, a Trump presidency would likely mean the US will be very much in the same boat as Europe.

Click here to see a full overview of delegate voting results from Expert Investor Sweden.

And here you can see a slideshow of photos taken at the event. 

Part of the Bonhill Group.