European equities could be the main beneficiaries of US stimulus, with emerging markets potentially hit by "negative spillover", according to guests on the latest FTAdviser Podcast.
Joe Biden has now marked more than 100 days of his term as President of the United States and during that time has signed a $1.9tn stimulus package, put together a $2tn package of infrastructure spending and unveiled a $1.8tn package of reforms on issues such as healthcare and labour laws.
On this week's FTAdviser Podcast, digital editor Damian Fantato is joined by Ed Smith, head of asset allocation research at Rathbones, and Ilan Chaitowitz, manager of the Nomura Global High Conviction fund, to discuss how this stimulus will affect investors and markets around the world.
Smith said there would be "spill overs" to the US stimulation of demand through trade but he predicted the main beneficiaries of this would be investment and capital goods rather than consumer goods, which he said might have peaked last year.
He said: "Actually Asia and emerging markets, which would tend to do very well out of a stimulation of US demand via trade, might not do so well because they already got an artificial boost to their trading relationship last year as most of us were hunkered down in our houses and only able to buy goods and not services."
Indeed he said Europe could be the main beneficiary, with emerging markets potentially hit by "negative spillover" of the stimulus due to higher US bond yields and a stronger dollar because they are much more dependent on dollar funding costs.
Chaitowitz said: "I don't think we have yet seen the impact of [the stimulus] fully in the real world. One metric I like to look at is consumer confidence [...] and that still isn't where we were pre-pandemic.
"If we look at where markets are those have nearly recovered, some are way above where they were before the pandemic and those are leading indicators. So there's a disconnect between where consumers are in their mindset and in their worlds and what markets are anticipating is going to be the case in six to 12 months' time."
He said many consumers were still working from home, or out of work, so hadn't necessarily yet felt the benefit of any stimulus.
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