Po­ten­tial for US pol­icy er­rors un­der Trump on the rise

The Star Early Edition - - OPINION & ANALYSIS -

WOR­RIES over Don­ald Trump’s eco­nomic poli­cies and the po­ten­tial for US pol­icy er­rors rose sharply this month, ac­cord­ing to a sur­vey of fund man­agers re­leased yes­ter­day, prompt­ing them to hold more cash, even though they ex­pect growth and in­fla­tion to rise fur­ther.

Bank of Amer­ica Mer­rill Lynch’s monthly fund man­ager sur­vey for Jan­uary also showed that the high­est pro­por­tion of in­vestors since 2006 think the dollar is over­val­ued, and the high­est in al­most 14 years think the euro is un­der­val­ued.

The monthly sur­vey of 215 clients with $547 billion (R7.43 tril­lion) of as­sets un­der man­age­ment was con­ducted be­tween Jan­uary 6 and 12, two months after the US elec­tion.

Since Trump’s vic­tory, US stocks have hit record peaks, tum­bling bond prices have pushed yields up to mul­ti­year highs, and the dollar has reached a 14-year high. But th­ese so-called Trump trades have faded since the turn of the year. In­vestors are in­creas­ingly ner­vous about what a Trump ad­min­is­tra­tion’s poli­cies will be and how they will af­fect world trade, growth and fi­nan­cial mar­kets.

The big­gest “tail risks” in last month’s sur­vey were con­cern of fur­ther EU dis­in­te­gra­tion or bank de­faults (29 per­cent), and a stagfla­tion­ary crash in the bond mar­ket (26 per­cent).

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