Wealth managers wary of 'Trump risk' for EMs but eye opportunities in US stocks

Reduced regulation in financials a 'positive factor'

Daniel Flynn
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Photo: Gage Skidmore/Flickr
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Photo: Gage Skidmore/Flickr

Asset allocators in the UK are bullish on US equities following wildcard Donald Trump's victory in last week's US Presidential Election, highlighting healthcare and infrastructure as particular beneficiaries, while emerging markets are predicted to face headwinds.

Despite pre-election polls indicating Democratic presidential candidate Hillary Clinton had the edge on Trump (pictured), the Republican ultimately won 279 electoral votes, comfortably surpassing the 270 required to become president, while his party retained control of Congress by winning a majority in both the US Senate and the House of Representatives.

Some of Trump's controversial campaign pledges included reducing corporation tax by 15%, introducing a 45% tariff on Chinese goods, and increasing fiscal expenditure by what has been estimated to be $5.3trn.

'A recipe for economic uncertainty': The market implications of a Trump presidency

Andy Merricks, head of investments at Skerritts Wealth Management, said biotechnology and healthcare stocks will be the "one clear winner" of Trump's presidency, with the iShares Nasdaq Biotechnology index up more than 7% on the day after the election.

"We expect to increase our already weighty holdings to these sectors in the coming months," he said. "However, our portfolios have been positioned for a 'shock' such as this and we do not anticipate changing much in the next few weeks."

James Sullivan, director at Coram Asset Management, said the healthcare sector will breathe a "sigh of relief" at Trump's election, and he also expects infrastructure funds to benefit from the Republican's generous plans for fiscal expenditure, although the manager is not planning to make any immediate changes to portfolios.

"Infrastructure will be well positioned to capture Trump's plans to rebuild roads, schools, hospitals, and many other areas," he said. "Cash retains wonderful optionality, but markets are still coming to terms with the news and the pricing of assets remains volatile and potentially fragile."

US equity allocation

Similarly, Ben Willis, head of research at Whitechurch Securities, who went into the election with an allocation to US sector funds focused on infrastructure and financial companies, plans to retain this core exposure and may look to increase his US position once initial market volatility has passed.

"We remain underweight the US due to valuations looking relatively expensive. However, when the dust settles we may look to add some US equities where we see areas of the market that could benefit from a political change."

US Election reaction: Will Trump's bark be worse than his bite?

Justin Oliver, deputy CIO at Canaccord Genuity Wealth Management, said a Trump presidency is likely to benefit the entire US stockmarket and he invested in a broad US equity ETF on the day of the election.

"Reduced regulation, lower corporate taxes, faster economic growth in the short term are all positive factors fundamentally.

"In informal discussions [on the day of the election], there remains an appetite to use equity market weakness as a buying opportunity," he said.

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