Samstag, 19. November 2016

Trump Cards: What Hand Have Investors Been Dealt?

Trump about economic policies

Thursday, November 17, 2016 wecbcast by Caroline Miller, BCA Research. She made following points:

  • Infrastructure programm and tax cuts will increase udget deficit
  • Tax reduction will not give a lot of bang on the buck compared to government spending programs regarding GDP growth
  • Fed pressured by Trump policy to increase rates, leads to USD strength
  • Europe needs 3 to 4 years to return to growth, Europe will not match rate increase
  • Japan has still low inflation
  • China is exporting structural deflation (overcapacity)
  • Dollar strength, Trump protectionism will hurt emerging Asia most
  • High corporate debt level in emerging markets
  • US Equity: no visibility of corporate earnings growth, wild cards of Trump appointees
  • US protectionism and  Backlash of US is a threat to growth
  • US deficit will steepen yield curve
  • Trump tax program will benefit small caps not multinationals
Investment recommendations:
  • Underweight duration US bonds, preference of TIPS
  • Underweight peripheral european bonds
  • Overweight USD
  • Overweight pharma, staples (defensive stocks) 
  • Underweight tech, industrials and commodities (cyclical stocks)
  • Underweight US vs. European equities: USD will hamper US profits. Profits margin are very high in the US historically and compared to Europe. They can't grow on that level

I really think that we have entered a new economic environment in the US.



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