10th November 2016

Architas: Measured Trump calms markets

"Donald Trump’s victory speech has so far struck the right chord with markets. You could see US futures improving as he delivered his speech talking about the need to unify America and extract the potential from across all sections of society. He made clear statements about his intention to spend on infrastructure, investing in everything from roads to hospitals. He also appeased concerns about foreign relations by committing to work with countries that are willing to work with the US. This is contrary to some expectations. This is a continuation of how he has softened his rhetoric throughout the campaign and he is perhaps now switching into Presidential rather than campaigning mode.

“This should result in a less dramatic outcome for equities, currencies and bond markets than many investment commentators had expected. In our Active portfolios we have been slightly increasing exposure to funds with positions in banks and commodities as we expected them to benefit from Trump’s pro growth stance and commitment to infrastructure spending should he be victorious. We also recently reduced our UK sovereign bond exposure in favour of US sovereign bonds, which we felt would provide downside protection in a risk off event. Question marks over the potential rate rise in December may also now add to the performance of US Treasuries.

“Infrastructure is an area we have been adding to recently. We see Trump’s announcement as the first move in a global wave of developed market commitment to infrastructure spending.

“Overall Trump’s response so far has been measured. The market response is likely to be similar if he continues in this initial vein.”

Investments, Investment Commentary