What asset allocation strategy should investors adopt after Donald Trump’s election victory?
Read Nuno Teixeira's analysis, Head of Institutional & Retail Solutions in the Investment and client solutions investment division.
What is your analysis of the potential macro-economic impact of Donald Trump’s program?
“It is clear that after the initial reaction of utter shock, and even concern, the market decided to look at the economic outlook after Trump’s election with relative goodwill, with US equities quickly striking a positive trend.
The market is expecting a reflationary scenario in the US and is particularly looking to the Keynesian aspect of Trump’s program, with a positive impact on growth from the infrastructure stimulus plan (3-5% of GDP over several years according to estimates), as well as from tax cuts.
However, implementation of this infrastructure program will take a long time and will not have the desired effects in 2017. Furthermore, in view of the current lack of supply of labor in the construction sector, multiplier effects are likely to be fairly small. Taking a look at the cut in minimum corporation tax, it is obvious that only a limited number of listed companies actually pay a tax rate of 39%, but a reduction to 15% would definitely bolster earnings per share, if it is actually implemented. In the absence of attractive investment opportunities, this move, along with the plan to encourage companies to move currently foreign-held earnings back to the US could encourage firms to embark on share buyback programs, thereby buoying share prices.”