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The US Election Result – our view

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A fascinating evening at the US election is followed by an unexpected outcome, which sees Donald Trump beat Hilary Clinton in the race to be the next occupier of the White House.

We talk to our Head of Investments, Alan Cram, to discuss some of the possible implications;

“What does it mean for the world economy?”

Trump’s economic mantra has been one of increased jobs, economic growth, reduced taxes, and a focus on protectionism.

One of the big issues is his views on international trade and his attitude towards China. Trump called the Chinese a currency manipulator, the implication being he may look to impose trade tariffs to create a level playing field for American companies. Retaliatory actions from China could be detrimental to internationally focused US companies and trade wars rarely create a constructive environment for economic growth.

American companies have benefitted hugely from globalisation and international trade so is Trump willing to potentially sabotage the prospects of US businesses in an all-out world trade war? The answer would, hopefully, be no as this could have severe implications for the US economy. Trump is unashamedly pro-business and I would expect that he will do all he can to help American companies which inevitably involves two-way negotiation at international trade level.

I would note that, previous presidents haven’t implemented 100% of their election pledges, Obama only implemented c.70%. Trump has no political track record and what we are about to find out is how much of his campaign promises will follow through into policy, and what was populist rhetoric.

“What does a Donald Trump Presidency mean for the relationship between the US and the UK?”

It shouldn’t affect anything if pragmatism prevails. Trump has invested in the UK over many years (his mother was born in Scotland and he owns Turnberry Hotel and Golf resort as well as another resort in Aberdeenshire) and is seen as pro-British.

In economic terms, the UK’s negotiations with Europe following Brexit will likely have a bearing not only on our trading relationship with the US but also globally. London retaining its position as the leading European financial centre will be paramount otherwise the large US Banks and Asset Managers will transfer offices and jobs to cities like Paris and Frankfurt. Therefore, the pressure is more on us irrespective of who their president is.

In political terms, they will probably still see us an ally although his views on NATO could be divisive.

“Obviously in term of the markets, across the board, the initial reaction had been extremely negative following the election result, but there seems to have been a bounce back. What is the pattern likely to be following this?”

The reaction in the markets has been similar to Brexit, some technical support levels (i.e.  the support level is the perceived predetermined price of a security where any fall would be expected to attract buying interest) were tested in the overnight futures market and strong rebounds followed through in open market trading. There is a belief that the uncertainty will reduce the likelihood of an interest rate rise from the Federal Reserve when they meet in December, a positive for equity markets.

The reality is that the vote for Trump, like the vote for Brexit, has created uncertainty and with that we would expect some volatility. As mentioned, he is pro-business and has hinted at a tax deal/amnesty for American companies to repatriate their overseas cash piles – presumably with some caveat on how that money is put to work within the American economy.

“Trump was critical of several US trade deals. If Trump scraps the North American Free Trade agreement, then what does it mean for Canada and Mexico – will they put up the wall?”

Trump called NAFTA the “worst trade deal in history” although clearly US companies have benefitted from the ability to invest in Mexico. As we are discovering with Brexit and the initial legal hurdle relating to the involvement of parliament, the renegotiation of any deal will not be straightforward.

The Mexican economy is likely to suffer on the basis that 80% of their exports are to the US and many American firms have invested heavily in Mexico.

As for the wall, I remember the Berlin wall coming down and the general wave of euphoria and optimism that came with that. It would be a gigantic backward step to decide that the answer to a problem is an enormous divisive wall across the border. It certainly doesn’t feel like progress.

“Bookmakers were offering odds of 3/1 on Trump winning the election – the same odds as a successful Brexit vote. What do you think made people vote for Trump rather than Clinton? “

There is a wider swell of public opinion across many so-called developed countries and economies that the average member of the public is unhappy with their lot. Since the financial crisis the inequality gap has widened dramatically and there are more people who now feel that they have nothing to lose but to vote for something completely different.

Clinton was part of the perceived Establishment who have benefitted financially throughout the period when the average American was struggling to pay the bills so she may have been seen by some as part of the problem. Also, if she had been elected then that means that 24 of the last 32 years of presidency in the US would have been held by two families – Bush and Clinton. For a country with a population exceeding 320 million people this would have been a damning indictment of the state of their democracy.

Within the US there were clearly a variety of factors – the feeling that the American Dream is dying being one of them. The reality is many ordinary Americans simply want to work hard and feel financially secure, but in a global marketplace there is very little long term security anymore.

Brexit may also have played a role as the perception is the UK has become the first of the established countries to vote against the prevailing status quo. It sends a message to other disenfranchised voters that it can be done, and it is at times like this that modern day politicians are forced to rethink their views, principles and opinions to make sure they get themselves elected again.

“In his first 100 days, Trump has said he will cancel all payments to UN climate change programmes. What do you think this will mean for the environment, green and sustainable shares?”

The current US agreement is a version that Congress effectively “watered down” from the terms that Obama presented so one assumes that Congress would need to be consulted again. He has openly stated that companies are wasting money paying for environmental issues when, in his opinion, there is no proof that climate change is anything other than weather. His organisation’s comments in 2015 following a Supreme Court decision to allow construction of a wind farm off the coast of his Aberdeenshire golf resort support this view.

If he does succeed, one implication could be the loss of government subsidies to some firms that operate within a specific environmental remit – an example being renewable energy sources where we have seen government encourage and financially support research and development in this sector.

Sustainable funds do well in their own right because many companies acknowledge the wider investor appetite for socially responsible policies within their firms. This is often more than any government policy as there is much more media scrutiny towards the corporate governance of an organisation.


The first comment to repeat is that Trump is pro-business which should be positive for the markets. There will inevitably be volatility until we discover exactly what his policies are going to be but he is not going to set out to cripple the financial system from which he has benefitted from significantly. Inflation, interest rates and currency movements are going to be some of the key indicators to watch over the coming months and years as they will have a huge bearing on the behaviour of financial markets. It will be interesting.

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