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Aberdeen warns about consequences of US economic policies

Aberdeen warns about consequences of US economic policies

Investors into Asian markets are at the mercy of rising US interest rates and trade tensions, according to Bruce Stout, who runs the £1.4bn Murray international investment trust at Aberdeen Standard Investments.

Mr Stout said recent US interest rate rises, and the ongoing trade disputes between the US and China were leading to a reversal of sentiment among investors, which was likely to be persistent, and damage returns for investors.

The manager has long been concerned about the robustness of the global economy, believing the policies of quantitative easing, low interest rates and government borrowing have caused investor sentiment to become detached from economic reality.

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In a trading update to investors this morning (17 August) Mr Stout said: "With politics replacing anticipating actions of central banks as the most important influence on financial markets at present, it’s not surprising that volatility increased and irrationality intensified as investor complacency was periodically rattled.

"Should the President of the United States remain committed to intensifying trade protectionism on China, Canada, Mexico and a host of other nations, then global financial markets are unlikely to view such deteriorating trade relationships favourably.

"The growth threat to an increasingly inter-dependent world is clear for all to see."

He said concerns about higher interest rates and trade disputes were the dominating investor sentiment in a way that hasn’t been the case in recent years.

Charles Clarke, chairman of the £400m Aberdeen Asian Income investment trust, had stated in the trust's latest update: "After a bright start to the year, market sentiment quickly gave way to fears of faster interest-rate hikes, higher oil prices, and an escalation in trade tensions.

"After simmering for months, the trade dispute between the US and China boiled over with the world's two largest economies playing their opening hands and imposing the first round of tariffs."

Philip Milton, who runs Philip Milton and Co, told FTAdviser yesterday increased uncertainty may mean now is the time for investors to hold off putting new capital into the market.

david.thorpe@ft.com