In the aftermath of Trump’s surprise win, when he defeated Democratic candidate Hillary Clinton, Neil Woodford explained he expects the result could “puncture a love affair” that the market has had with emerging equites and debt, as well as bring about a shift from free trade and globalisation to a focus on domestic political priorities.
Neil Woodford added: “From a financial market perspective, to an extent, we have a playbook on what happens next, courtesy of the aftermath of the EU referendum in June.
“Given the relatively muted response from markets thus far, perhaps investors have learnt that there is no need to panic – it was wrong to overreact to the Brexit it vote, and in my opinion, it would be wrong to overreact [with Trump’s win].”
While the formal announcement of Trump’s win sent global markets into varying degrees of a tailspin, it has been widely felt that his considered victory speech has calmed nerves. The FTSE 100 has already recovered initial losses, while the US dollar bounced back from its earlier fall to sit at a position only slightly lower against the euro.
“As much as this election result is a vote for Trump, in my view, it is also a vote against the political establishment from a large part of society that is angry that policy has done little to help it since the global financial crisis,” he said.
Neil Woodford believes people will be concerned after the election result, given the Trump’s discourse over the last year and a half of his campaigning, but sees the constraints of the White House office as making him “likely to be much more moderate”.
He expects the momentum of the US economy to continue, with “modest growth” in 2017, muted inflation and possibly a more stimulative fiscal policy.
“Thinking more broadly, the US presidential result should remind investors that there is plenty of scope for political surprises. There are several significant elections looming in Europe over the next 18 months, which could be profoundly important for the future of the eurozone project,” he commented.
“It would be wrong to assume that America has a monopoly on disgruntled voters and we will keep a very close eye on political developments.”
Looking at his own investment exposure, Neil Woodford revealed it doesn’t change the assumptions that influence his investment strategy.
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