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You're listening to Strictly Business
Podcast with Lindsay Williams.

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Donald J.

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Trump is to be the 47th President of the
United States of America, a remarkable

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achievement.

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In fact, he's only the second president in
US history to serve two terms

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non-consecutively.

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The last one was in the 1890s. And also,
don't forget that he's a convicted felon,

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and that's the first time that's ever
happened as well.

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But never mind politics.

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What about markets?

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With me is Philip Saunders.

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Director at the Investment Institute at 91
in London.

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We have to say something about politics,
Philip, just to put everything into

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context.

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It is a remarkable turnaround achieved by
Donald J.

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Trump, isn't it?

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Absolutely.

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I mean, the guy has shown extraordinary
resilience.

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And, you know, the Democrats have done
everything to try and prevent him from

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running.

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You know, this is a wonderful word,
lawfare.

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whereby you basically use the legal system
to pursue your particular sort of

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political ends.

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And, you know, and he sort of carried on
and on and on.

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So I think it's a remarkable achievement
politically.

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And we will find out whether it's a good
or a bad thing.

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Yes, indeed.

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The next 90 days are going to be a sort of
an interesting time.

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But when he is sworn in on January the
6th, I think it is.

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And then we'll see if the promises he's
made are going to come to fruition.

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But as I said, it's not to do with
politics.

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This podcast is to do with the markets.

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And as the results came in, the S&P just
kept on ticking up, the S&P 500.

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So the equities markets loved it.

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Can this continue?

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In other words, can risk assets,
particularly in the United States,

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continue that momentum that they've
already started?

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Well, I think that, you know, bear in mind
the fact, you know, we've had a pretty

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spectacular year in terms of...

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of performance or certainly over the last
12 months or so,

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albeit narrowly led for quite a part of
that.

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And so, you know, we're in a cyclical bull
market at any rate.

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And we then saw quite a lot of de-risking
prior to the election because of, you

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know, the typical sort of uncertainty.

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Shorter term investors tend to, you know,
hedge positions and so forth.

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And as soon as it became clear...

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that the polls were wrong and the betting
markets actually were right,

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then you saw basically this sort of risk
on move with the

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S&P going up, with the dollar
strengthening and some other international

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equity markets sort of

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doing the opposite.

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So the context of course is actually You
know,

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concerns about a hard landing have reduced
significantly in recent months.

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The bond market basically has fallen in
part because basically hedges have been

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coming off.

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You know, there's been less hedging of
that sort of hard landing risk scenario.

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But, you know, Trump in his first term
proved to be actually, despite the

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rhetoric,

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a pretty conventional pro-business.

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um pro deregulation uh president um and uh
and and i think that that's the

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market participants conclusion is that
basically growth will be probably growth

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and inflation will be higher under trump
uh

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but and that he's pro-business um and he's
going to engage in a lot of deregulation

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you know and so market

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participants uh you know like the sound of
that

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yes they do but does the man and woman in
the street like the sound of that because

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I think what you're saying with the
inflation story is that if he imposes all

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these tariffs that he's promised to do,
whether it be 25%

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across the board or, you know, 200% on
certain Chinese imports,

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in the short term is very inflationary and
people will suddenly say, wait a second,

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inflation was X when you came to power and
now it's X plus one and a half or

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something.

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And that means the bond market does
suffer.

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So there's all sorts of imponderables
here, Philip, because he is.

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He's a maverick, isn't he?

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I think that's a polite way of putting it.

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Yeah, he's definitely a maverick.

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And, you know, but he's not a fool.

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And he's also highly transactional.

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And so, you know, who knows what the
ultimate policy will be vis-a-vis track

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tariffs, you know,

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they might be very narrowly based.

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And, you know, we'll have to see and that
will certainly, you know, there'll

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certainly be areas of uncertainty, you
know,

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but you're not going to go into a
negotiation with a position of low

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tariffs, are you?

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I mean, it wouldn't make sense at all.

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And that's the nature of Trump that we saw
in the first term.

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So the bark is generally worse than the
bite.

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But he's transactional.

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And so...

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He believes in doing bilateral trade
deals, obviously particularly with the

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Chinese.

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And he believes in doing things that are
good for business.

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And if you do that, then it'll be good for
employment and good for the economy.

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Yes, well, hopefully that's true.

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And hopefully he'll act on his promises.

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I spoke about the S&P 500 in my
introduction.

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And to me, that was a...

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an incredible knee-jerk reaction.

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Maybe there were some shorts that had to
be covered.

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I don't know.

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We need not get into the technicalities.

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But what about the other asset classes?

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Will you be sitting down with your team?

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Have you already sat down with your team?

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I don't know.

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And discuss the implications of this and
maybe repositioning because of what is to

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come in January, i.e.

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a new four years of Trump.

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So we're having a sort of continuous
conversation about positioning.

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So, yeah.

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We don't have to wait for meetings and so
forth.

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And, yeah, I mean, I think we've sort of
come into this pretty well positioned.

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And for the time being, we think that
we're in, you know,

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obviously this sort of continuing cyclical
bull market for equities.

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And we're also likely to, you know,

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inflation is likely to be pretty well
behaved for the time being, you know,

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which provides the Fed with, you know,

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headroom to continue to cut rates, which,
of course, is...

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positive for markets.

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So, you know, we have to remember,
actually, when the chips are down,

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US presidential election results, you
know, have less impact than people

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generally believe,

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because they're exposed to an enormous
amount of media coverage.

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So it's the underlying fundamentals that
are really going to drive things and

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certainly determine what the outcomes are

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over a full presidential cycle.

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And quite often, you know, the results are
sort of seemingly perverse.

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So under Trump in his first
administration,

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he had it in for big tech.

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And actually, big tech were the best
performing companies during his

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presidency.

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And if we take Biden, actually,

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he introduced a lot of legislation to
drive the energy transition in the States

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and to fight climate change.

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And, you know, what was the best
performing sector, at least until August?

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It was actually the oil companies, best
performing sector, fossil fuels, i.e.

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the enemy.

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So we have to be really quite careful
about not putting too much weight on, you

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know,

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speculation about presidential policy.

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OK, so the short term is going to be
volatile, I would imagine.

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But once the dust has settled, Philip.

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Are you quite happy and quite sanguine
about the fact that Mr.

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Trump will be in the White House and
things will go on relatively smoothly

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unless he makes a silly speech here and
there?

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Yeah, I mean, I think that, you know, as I
said earlier on, you know, you've got to

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sort of look through the rhetoric to some
extent.

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And now it's certainly true that the
Republicans are going to control the

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Senate and there's a pretty good chance
they'll

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end up controlling the House as well, the
so-called red sweep.

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But the margins of control will be pretty
limited.

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You know, it's pretty narrow.

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And that means that the sort of
constitutional structure, you know,

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means that he won't simply be able to
waive everything he might want through.

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So the constitutional structure, you know,
is still going to work to sort of mute

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policy.

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I, you know, mean that policy has to be
negotiated with the two houses.

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So that, I think, means that you're not
necessarily going to get unadulterated

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Trump policies.

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And we don't know necessarily.

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We've got some sort of clues, obviously,
but we don't know what he's going to

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prioritize and we'll have to sort of see.

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But in the meantime, you know, it looks as
if we're sort of moving into a broader

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reflationary phase internationally.

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It's going to be interesting to see the
Chinese response.

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And we suspect that the Chinese, you know,
obviously they're due to have one of them.

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important meetings coming up in the next
few days.

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And we think they're going to go
relatively large in terms of stimulus.

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And I think elsewhere in the world, you
know, particularly Europe,

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we're going to have to see more of a
fiscal response in order to actually drive

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growth.

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And that, you know, means that we're
probably moving into a period of

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synchronized expansion.

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And equity markets are going to like that.

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Bond markets, not so much, but equity
markets are going to like that, because

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it's good for earnings.

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and it's good for market breadth which has
been lacking.

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Thank you so much for your analysis.

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Philip Saunders is a director at the
Investment Institute at 91 in London.

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The views and opinions expressed in these
podcasts are those of Lindsay Williams and

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various contributors and do not reflect
the policy,

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position or opinion of any other agency,
organisation,

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employer or company associated with
StrictlyBusinessPodcast.com.

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Assumptions made on the analyses are not
reflective of the position of any other

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entity.

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other than the speaker or the author.

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And since we are critically thinking human
beings, these views are always subject to

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change,

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revision and rethinking at any time.

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Please do not hold us to them in
perpetuity.