Donald Trump’s election was a major surprise as far as financial markets and pollsters were concerned. The initial sharemarket response has been volatile but our objective is to determine the medium and long-term impact of a Trump Administration.

 Our initial conclusion is that Trump’s election will have positive, as well as potentially negative, implications for sharemarkets and bond markets.

The most positive feature will be a boost to United States economic growth through Trump’s massive infrastructure spending proposals. This policy, if successful, will be a huge boost to the US engineering and construction sector. His proposed corporate tax rate reduction, from 35% to 15%, should encourage US business investment and economic growth.

The potential negative implications are rises in inflation and interest rates. This would make high income-yielding stocks less attractive.

Other potentially negative developments are increases in trade restrictions although his policies in this area are vague. He seems to be more concerned about enforcing current trade agreements rather than introducing new restrictions.

The main issue with Trump is that his policies are unclear. Our strategy is to assess his policy statements over the following weeks and months and identify the best investment opportunities while reducing our exposure to areas that will deliver lower returns.

Although short-term issues cannot be neglected, investment management is a long-term business and we try and take a one to two year view.

In recent years we have had the global credit crisis, the Greek debt issues, the US Government debt crisis, a major Chinese sharemarket crash, Brexit, European banking issues and major concerns about the Chinese economy. Milford has successful navigated its funds through these issues as they have created opportunities as well as potential problems.

There is little doubt that the Trump presidency will create challenges for investment markets but our strategy is to identify the positive opportunities while reducing our exposure to areas that will underperform during his stewardship.


Milford Asset Management