By Naomi Rovnick
LONDON (Reuters) – Big international traders are exiting widespread trades that guess on US President-elect Donald Trump’s tax and tariff insurance policies boosting Wall Street and wreaking harm overseas and swooping in on among the Nov. 5 election’s greatest market victims.
After US shares and the greenback bounced on Trump’s development agenda and commerce warfare fears pressured Chinese, European and rising market property, cash managers are attempting to find bargains in locations the place pessimism could have gone too far.
“The thesis that Trump is good for the US and bad for the rest of the world is a very common narrative,” mentioned John Roe, head of multi-asset funds at Legal & General Investment Management, which manages 1.2 trillion kilos ($1.52 trillion) of investments.
He mentioned this had satisfied him to purchase non-US property that will have been excessively bought – like European car-makers and the Mexican peso – and shut pre-election positions that profited from sterling and Chinese tech shares falling.
European auto shares touched their lowest in nearly two years on Wednesday whereas the Mexican peso has fallen greater than 2.5% versus the greenback this month and sterling is down some 5% towards the dollar since end-September.
Shaniel Ramjee, a multi-asset co-head at Pictet Asset Management, which runs 254 billion Swiss francs ($285.43 billion) of consumer funds, mentioned he had elevated holdings of Chinese shares and Brazilian bonds because the election.
“There will be a really good opportunity in assets that have weakened ahead of and after the election, we see a lot of value,” he mentioned.
Investors are actually questioning the favored market view that Trump will aggressively pursue insurance policies that exacerbate US inflation and derail Federal Reserve charge cuts, given voter anger about residing prices and client worth rises.
Too far?
Since the eve of the election, US shares have risen greater than 4% whereas European equities have fallen about 1% and rising market shares are at two-month lows.
“The news flow (for non-US markets) is so negative right now that any kind of good news could move things quickly,” Morningstar European fairness strategist Michael Field mentioned.
The euro, down about 3% since Trump’s win, hit a one-year low of $1.052 this week and 10-year U.S. Treasury yields jumped 14 foundation factors (bps) to 4.47%, as merchants guess on increased US rates of interest and inflation.
Europe is mired in pessimism, exacerbated by the collapse of Germany’s authorities and fears for exporters, with Volkswagen shares buying and selling at about 3.3 occasions forecast earnings and European chemical producers down 11% since late September.
