Political trends creating investment uncertainty
April 25, 2017
Many of Donald Trump’s proposals — from infrastructure spending to changes in trade relations in a bid to help rebuild American jobs — have generated a range of investor expectations and reactions. Along with other market and economic unknowns, these trends have culminated in a market environment of uncertainty. It’s one in which investors may want to rely less on riding out these market uncertainties, and instead may want to turn to strategies such as active management, which offers the potential to manage portfolios for uncertainty-induced volatility.
Global trade, trade deficits, and trade agreements have become part of the national conversation, in part because they form a signature policy tendency of President Trump. For investors, shifts in trade relations can be important — whether it’s the potential economic effect on imports and exports to large trading partners, possible impact on emerging markets such as China and Mexico, or a hoped-for resurgence of US manufacturing jobs.
The poor state of much of the nation’s roads, bridges, and other infrastructure is something on which many have been able to agree. How to pay for the massive price tag to bring America’s infrastructure up to par is another matter. Infrastructure spending proposals have the potential to affect investors, especially if a significant amount is derived from issuing municipal bonds.
With key economic indicators showing signs of improvement, the US Federal Reserve has begun to tighten monetary policy. But a variety of other factors — including the path of economic growth, the actions of other central banks, or the possibly altered makeup of the Fed — could figure into the magnitude and pace of interest-rate changes, all of which could have a big effect on markets and investments, particularly in fixed income.
The views expressed represent the Manager's assessment of the market environment as of April 2017, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager's views.
All charts shown throughout are for illustrative purposes only.
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