Briefing: Trump and your portfolio

How should investors position themselves for a Donald Trump administration?

The new landscape

“Investors remain on tenterhooks as to what kind of president Donald Trump will be and what impact he will have on the global economy and stock markets,” said Gavin Lumsden on Citywire. The “conciliatory tone” of his victory speech, and the suggestion of a programme of tax cuts and infrastructure spending, put an end to the initial flight to safety. Indeed, the Dow Jones reached a new record intraday high as traders speculated on the industries and firms that might benefit. But the risk remains that “if Trump uses his majority in Congress to give full vent to his aggressive protectionism, he could spark a trade war that would hurt both US and global economies”. Fears of this continue to fuel volatility in equity, bond and currency markets.

US stock exposure

Many fund managers believe the outlook for US stocks is “pretty positive”, said Mark Atherton in The Times. Michelle Mcgrade of TD Direct Investing thinks the new administration’s “progrowth policies” will prolong a bull market that is already “the third-longest in history”. Obvious beneficiaries are oil and gas companies, including shale producers, who stand to profit from the removal of drilling restrictions. Defence contractors should gain from Trump’s pledge to beef up the military, while his $1trn pledge to splurge on infrastructure is manna for the engineering and construction sectors, as well as commodity producers.

Local bets

Even if you don’t invest in the US market, you can get a slice of the action locally, said Russ Mould of online stockbroker AJ Bell. He tips FTSE players Wolseley and Ashtead when it comes to infrastructure, and BAE and Meggitt on defence. Meanwhile, the rally in drugs stocks because Hillary Clinton’s proposed price-cap strategy is no longer a threat could continue to benefit Shire, Glaxosmithkline and Astrazeneca.

Emerging markets

Trump’s threat to impose tariffs of up to 45% on goods from China and Latin America could weigh heavily on emerging markets – particularly if infrastructure spending proves inflationary and drives up US interest rates, triggering capital outflows. “Still, all is not lost,” said Merryn Somerset Webb in the Financial Times. In fact, you may have a better chance of making positive returns from some of these markets than from US stock exposure. “Already far from cheap”, US stocks “are priced for perfection in a very imperfect world”. Given that Trump and Vladimir Putin “seem keen to get along”, the obvious emerging market to look at is Russia – long in a bear market, now rising.

London property boost?

Global uncertainty triggered by Trump’s victory, coupled with forthcoming European elections, could well put London property “back on the map”, said Carol Lewis in The Times. The weakening of sterling in the aftermath of Brexit has already seen an influx of international investment cash, according to Naomi Heaton, CEO of London Central Portfolio. “This could increase the momentum.”