How Can You Trump-Proof Your Investments?


How Can You Trump-Proof Your Investments?

US President Donald Trump’s 100 days in office has been nothing short of interesting. But how has it affected your investments?

Published on 3 May 2017

The first 100 days of US President Donald Trump being in office has – if nothing else – highlighted his inability to deliver on promises. From his attempt to impose a travel ban on Muslims entering the US to repealing Obamacare to getting Mexico to finance his proposed wall at the border, the underlying theme of these promises is his inability to turn his proposals into actual plans.

Historically, most major political events – in the US and elsewhere – have had knock-on effects on investments – whether in the lead-up to the US presidential elections , a Trump victory or the formation of his cabinet. So, how has his first 100 days in office affected your investments?

An overview

Since his inauguration, nearly all asset classes (with the exception of commodities) have recovered. As such, asset class performance has been strong – according to Tuan Huynh, Chief Investment Officer of APAC at Deutsche Bank Wealth Management.

“The S&P 500 has rallied to an all-time high and posted the third largest return from election day through the first 100 days of any president since Dwight Eisenhower,” Huynh reveals. Apart from that, he adds that both high-yield and investment-grade bonds have also seen recovery.

The US dollar – however – has disappointed in the first four months of this year. According to Philip Wee, Senior Currency Economist at DBS: “Unless and until the Trump stimulus materialises, the US dollar will continue to struggle.”

“The pressure on the US Dollar Index (DXY) is attributed to Trump’s struggle to deliver on campaign promises of economic stimulus,” says Wee. He adds that after the collapse of Trump’s healthcare bill, many doubt that his tax cut plan will pass this year.

But it’s good news if you hold Asian currencies, as most have strengthened against the US dollar this year.

*Sources: DBS Research, Bloomberg market data

A Trump-proof strategy to investing

As Bryan Goh – Chief Investment Officer at Bordier & Cie (Singapore) – succinctly points out: “Betting on President Trump being able to execute his plans is risky.”

David Lafferty – Chief Market Strategist at Natixis Global Asset Management – agrees: “Reviewing the president’s performance so far seems appropriate, given its likely effect on investor portfolios going forward.”

Presidencies are not made or lost in 14 weeks
– and neither are investment portfolios

“The first 100 days may provide a useful picture of what investors should both applaud and fear from Trump’s presidency, judged both by the hits and the misses,” Lafferty says. Goh cites this unpredictability as a reason why they have focused on investments that are less exposed to changes in the macro environment.

“In Asia, this has taken us into small-cap Japan, mid-cap India and company-specific investments in Indochina,” Goh shares. He adds that these investments are behaving as intended, driven by their specific situations and not by macro developments or factors such as foreign exchange or rates. In short, they are Trump-proof.

The bottom line

Lafferty believes that Trump is beginning to exhibit early signs of presidential practicality, perhaps even starting the natural transition from candidacy to presidency. “But investors should remember what Trump is – an easily agitated political novice with an itchy Twitter finger,” he cautions.

Likening Trump to a lion, Lafferty says: “Some lions can be trained to obey and even learn new tricks, but that doesn’t change the nature of what a lion is – an inherently unpredictable animal.” However, he adds that “presidencies are not made or lost in 14 weeks – and neither are investment portfolios”.

That being said, your best bet may still be to steer clear of investments with high exposure to macro risks such as an unpredictable Trump presidency.

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