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Trump and Brexit rhetoric must not deter investors

Trump and Brexit rhetoric must not deter investors

Donald Trump's victory has battered bonds and buoyed equity markets, leaving advisers facing concerns from clients over where they should invest given "anti-global" political rhetoric.

In a client newsletter, financial advisory firm Alpha Portfolio Management, commented: "Markets had not been pricing in a Mr Trump win despite the close nature of the US election. The world has to adjust to the perceived increase in geopolitical and economic risk.

"Clearly there are winners and losers. Mr Trump’s intention to re-negotiate the North American Free Trade agreement means Mexico is one of the biggest losers. Trade protectionism will also have repercussions for China."

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Also according to the newsletter, US treasuries "reacted badly" to the news as concerns grew about a possible inflationary ‘borrowing binge’.

The newsletter stated: "Has the 30-year bull market come to an end? Apparently, some $1trn has been wiped off the value of bonds globally since Mr Trump’s opening speech. A warning sign perhaps? 

"Contrary to initial fears, equities initially reacted positively to Trump. Bondholders however, have taken some pain where extreme yield levels, give little margin for comfort."

A poll carried out among advisers on FTAdviser's Advantage website found 43 per cent of advisers believed their clients were "holding fire" at the moment when it came to their portfolios, as they accepted a bit of short-term volatility.

However, 29 per cent were avoiding the US entirely at the moment, while 14 per cent of advisers said their clients were going ultra-defensive or buying into gold. 

However, Nigel Green, founder and chief executive of deVere Group, said investors should not worry too much about politics. 

He commented: "Populism is an increasingly important force in global politics. Understandably, people are worrying about their jobs, their wages, and stagnating economic growth. 

"As a result, they are seeking alternatives on the more radical left and the more radical right of the political spectrum."

He said this phenomenon has been evidenced by two high profile populists: Boris Johnson, who successfully led the Brexit campaign, and Mr Trump. Both men have won two key popular votes in the western world of 2016.

Mr Green added: "Elsewhere, in Europe, Marine Le Pen, leader of the far-right National Front party, is gaining considerable ground. Could she win the presidential election on 7 May next year?

"But despite the increasing abundance of anti-globalisation rhetoric, the tough policy talk from the politicians may fail to materialise to the extent that many observers are expecting and/or fearing.  

“Their more extreme approaches are likely give way, to some extent at least, to pragmatism and geopolitical and economic realities. After all, the world is becoming ever smaller, we’re all more inter-dependent, and globalisation is happening whether we like it or not.

“As such, there will be winners and losers in this new shaken-up era. So investors should not obsess about the wave of anti-globalisation. They need good fund managers who select investments that aim at the winning sectors, taking care to be diversified in their overall structures."