In this video James Andrews, Partner and Director of
Investment Management at Redmayne Bentley considers Donald Trump’s presidency.
He considers what the first 100 days might look like, opportunities for investors, any impact on the UK and whether we might see any surprises.
TRANSCRIPT
1: What will the priorities be in the first 100 days?
So, last time around the first 100 days were very busy.
We saw 24 executive orders, 20 presidential proclamations, and 28 bills enacted within those first 100 days. Twelve of those bills rolled back regulations that were brought in in the last few months of the Obama administration. So, yes, I expect it to be a very busy 100 days.
What are going to be his priorities? I think he’ll be focused on tax cuts. So, he made a number of tax cuts in his previous presidency that are actually due to expire this year. So, I expect those to be a priority, to continue them and maybe even deepen those tax cuts. So, that should be a focus in the first 100 days.
He’s talked about scrapping the clean energy tax credits. So, I expect that to actually take place.
What else are we expecting? I think we should be looking at tariffs. He’s talked a lot about tariffs against the key trading partners for the US, so the likes of Canada, Mexico, China, so I do expect those tariffs to be implemented. Last time around it wasn’t just rhetoric, those were implemented, and I expect that to be the case this time. It may well be a negotiating tool going forward, and they may then be paired back, but I do think they’ll get implemented early on.
Foreign policy is also likely to be a key priority. He’s talked about obviously the conflict in Russia and the Ukraine as well as the Middle East. He’s obviously talked about ending that conflict in Russia and the Ukraine within 24 hours, which I think is going to be a tall order but obviously it’ll be closely watched. Certainly, from a European perspective, it has the potential to have a big impact in terms of geopolitical stability, but also on things like energy prices and inflation here. So, that’s going to be keenly watched, but he’s talked about that as being a key priority.
Finally, he’s also talked about more domestically focused priorities, like border control and immigration. Recently that’s sort of reduced in terms of the wider rhetoric of lots of deportations, but certainly a focus, on for example, criminal deportations in the early days.
So, I think those are the key priorities and I expect it to be a busy first hundred days.
2: What opportunities might Donald Trump’s presidency offer investors?
There’s a number of opportunities potentially out there for investors post Donald Trump’s election. We have already seen that he's continued to threaten tariffs, increased tariffs, on key trading partners, be it Canada, Mexico, China and I expect that to come to fruition.
What does that mean? Why is that positive for investors? Well, it certainly should be positive for US manufacturing. So, it’s about protecting US manufacturing, so from a US domestic perspective, it should be positive for the manufacturing sectors, industrial sectors in the US should do well. So, that’s an opportunity for investors.
Elsewhere, we’ve obviously seen and heard a lot about Elon Musk and his involvement and I would expect, and we’ve already seen this, that the tech sector will continue to do well. It’s a story, I guess of less regulatory pressure on that sector and also I guess more supportive and that’s in addition to obviously what is a structural growth story there, the tailwind of AI and that story’s not going to go anywhere. And then, in addition, you’ve got that added benefit of Trump being a far more friendlier president towards that sector in general. So, that should continue to do well.
We’ve also talked obviously about the potential for tax cuts in the US, so a Donald Trump presidency is expected to see further tax cuts. The US small cap market should be key beneficiaries of that. We’ve already seen the US small caps rally quite strongly and I’d expect that to continue.
Elsewhere there’s few sectors that have benefitted already and that should continue. So, elsewhere we’ve got the clean energy sector, which has been negatively hit, because it obviously is seen as less beneficial for that area, but energy more generally actually has rallied quite strongly and I suspect and expect that will continue as again it’s a deregulation kind of story behind that and more favourable policy towards energy generally. So, that should continue to do well.
The same story applies, I guess, in the financial sector. Financials have done well and again, if we think things like bankers’ bonuses, the sort of pressures around that, regulatory pressures around banking and the financial sector that should dissipate. Trump is seen as a much friendlier president to that sector, so, again its rallied quite strongly.
3: What impact could Donald Trump’s presidency have on the UK?
So, the initial impact we could see in the UK is that of tariffs.
So, President Trump has talked about tariffs a lot.
He's talked about tariffs on imports being somewhere between 10 and 20% into the US market. We don’t do a lot of trade exports into the US, but obviously 10 to 20% tariffs would have a large impact on those exports that we do. However, a bigger part of our export market into the US is actually services. So, from an overall economic impact, it should be fairly negligible.
More interesting, I guess, is how that affects any kind of US-UK trade deal and I think that could obviously have a negative impact. If we feel like the US has leverage with these tariffs, we might enter into a slightly less beneficial trade deal with the US but overall I’m not sure that tariffs are going to be a big impact for ourselves and in fact if we avoid tariffs we might be able to actually do a bit more in terms of trade exports into the US, where others have stepped back because of the high levels of tariff.
From a UK perspective, then, actually the Ukraine and Russia conflict has much more of an impact, I think, in the near term. So, whichever way that resolution goes has a potential impact, in terms of food prices and energy costs. We saw in the early stages of that conflict, the negative impact on inflation following energy prices increasing, following food prices increasing. So, if that resolution goes in a way, I guess, the UK would not like, and indeed that wider Europe would not like, I expect that to be negative from both an inflation perspective, price increase perspective, but also therefore interest rates.
So, we’ve seen positive moves in interest rates and inflation in the UK. It’s been beneficial for the economy, it’s been beneficial for markets. The opposite is obviously true as well. So, if we see things go the wrong way we will see the increase in interest rates, we’ll see potential increase in inflation and therefore a negative impact on markets.
Not to mention obviously a keen focus on geopolitical stability. Markets don’t like instability. If we see further instability in the region that’s likely to be negative for both UK markets and indeed Europe as well.
4: Any surprises on the horizon?
Surprises with a Donald Trump presidency tend to go hand in hand, so, I’d expect there to be quite a few.
In terms of trying to forecast one, I guess I’d look at the US dollar. What I mean by that is the strength of the US dollar. At the moment, we’re talking about tariffs and the fact that Donald Trump is likely to bring in a number of tariffs with key trading partners, I think that happens, but perhaps the surprise is that in the medium term, that’s actually used as a negotiation tactic.
So, impose those high tariffs and then say, look, I can bring these high tariffs down, but there needs to be a quid pro quo, that being a devaluation in the US dollar, so a lowering of the US currency. So, if you think the US dollar is the reserve currency across the globe, pretty much, a strong dollar means other currencies weaken.
The opposite’s true, a weaker dollar means that other currencies strengthen and that helps economically.
So, what we could see actually see is that we see good economic growth going forward, triggered by the devaluation of the US dollar somewhat. Time will tell, but that could be an interesting surprise for the global economy.
This communication is for information only and does not constitute a recommendation or financial advice. Investments and income arising from them can fall as well as rise in value. The information and views were correct at the time of recording but may have changed at point of viewing.