Today (20 January) at 12pm an expert panel will discuss whether investors expecting higher economic growth from business man Donald Trump as he becomes President of the free world might need to lower their expectations.
Experts from Schroders, Brewin Dolphin and FE Invest will be ready to answer your questions about what the new US president will mean for you and your clients.
Russ Mould, investment director at AJ Bell said: "Markets need to be careful what they wish for if they see Trump as the new Ronald Reagan, at least in 2017."
Mr Mould commented that although US equity markets and, indeed, global share prices had been careening ahead since Mr Trump's election victory in November 2016, this was not necessarily going to remain the case.
He said: "Global share prices have been on a tear since Donald Trump’s victory in last November’s US election, buoyed by hopes over his plans to cut taxes, push for deregulation and increase infrastructure spending will fuel growth and inflation.
"This replicates what many see as a market-friendly package of reforms to match that launched by Mr Reagan after his 1980 triumph over Jimmy Carter."
Positive economic surprises are likely to tail off and the plug may be about to be pulled on the headlong rush into cyclical areas of the market.Brendan MulhernHowever, he warned that if investors thought Mr Trump might be a new Mr Reagan, they should consider that although the Dow Jones Industrials index ran up strongly after the 1980 election victory, it lost momentum after the 20 January 1981 inauguration.
Mr Mould said although Mr Trump's economic plans had suggested boosts for infrastructure spending, the plans might not always materialise.
He explained: "Failure to deliver concrete proposals could spread further doubt, eroding the support for stocks and the dollar and giving bonds a fresh boost. A poor year for US stocks would be oddly in keeping in with the historic trend evidenced by the first terms of Republican Presidents since the Second World War.
"The Dow Jones has declined on eight of nine occasions during the first year of a Republican Presidency and it has fallen on all four occasions when a Republican has taken the reigns from a Democrat."
According to Mr Mould, the average first-year drop under post-war Republicans of 1.2 per cent compares unfavourably to an average 13.2 per cent gain under Democrats.
Brendan Mulhern, global strategist for Newton Investment Management, agreed that although market performance suggests investors expect "higher real economic growth and inflation", it is important to recognise that markets were already pricing in a lot of risk.
He said: "Markets were already in risk-on mode well before Trump’s victory, pricing in higher real economic growth and inflation in response to the improvement in the global economy.
"As we move into the New Year, we believe investors should be focusing on the likely outcomes for liquidity, both in the US and at the global level, between now and late 2017.
"Positive economic surprises are likely to tail off and the plug may be about to be pulled on the headlong rush into cyclical areas of the market."
Have your say!
Today (20 January) at 12 noon, FTAdviser On Air will be hosting a live blog.
A panel of investment experts from Schroders, Brewin Dolphin and FE Invest will be ready to answer your questions about what the new American President will mean for you and your clients.
Send us your questions at @FTAdviser using the hashtag #FTAonAir and bookmark the following page:
simoney.kyriakou@ft.com
