Rathbones’ multi-asset manager David Coombs has shared his initial thoughts on positioning portfolios for a second Donald Trump presidency.
In a commentary note, Coombs outlined some of the challenges it would bring and the assets that could do well.
“During his first term I used to dread his Sunday night tweets,”’ he said. “Some random ill-thought-through rhetoric that would cause chaos in the markets for the start of the week. While I believe in free speech, I think his banning from Twitter was good for my stress levels.”
Coombs noted the recent plunge inTaiwan Semiconductor Manufacturing Company shares after Trump’s comments on Taiwan as an example of this unpredictability. “Like him or not, Trump moves markets and creates volatility,” he said.
“When Joe Biden won the last election, and I make no political point here, I was hoping for fewer chaotic headlines and a more considered approach to policy announcements. Crikey, we got that, but also a touch of the absurd in a President’s aids keeping him from view like a parody of Weekend at Bernie’s. Speaking purely selfishly, that was ok with me.”
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Coombs added that most of the Biden economic policies had a similar impact to Trump’s: protectionist in nature and fiscally loose.
In terms of the investments that could do well in a “reprise of MAGA”, Coombs pointed to construction possibly benefiting as reshoring of factories intensifies, and domestic manufacturers, if tariffs are applied unilaterally on all imports.
Financials would benefit if regulations are eased further, Coombs noted. Reductions in regulations may also help smaller companies compete and disrupt large incumbents across many sectors.
There are significant difference in the economic picture this time however, Coombs noted.
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“Last time, tax cuts were good for American corporate profits,” he said. “We think there’s little scope for the same this time given the impact that might have on Treasury yields from lost government revenue. Obviously, the environment is also very different to 2016 when we still had zero percent interest rate policy.
“It will be interesting to see if Trump tries to be more fiscally responsible in an effort to reduce Treasury yields. Normally you might expect this from a Republican President, following a Democrat. But Trump is no normal Republican.”
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