Three weeks on from the shock of Donald Trump’s election win, the investment community – in the world at large but also in the Arabian Gulf – is getting over the trauma of the unexpected and the fear of the unknown.
Global markets have not collapsed, as some feared, and in fact the equity markets have roared on to a new bull phase, reaching record highs as the economic upside of the new president becomes apparent.
Love him or loathe him, Wall Street is not blind to the attractions of a revamped fiscal initiative that will increase government spending on big infrastructure projects. Nor is it averse to accepting the big tax cuts Mr Trump has promised. So US equities have soared.
The bond markets are not so easy to read. Yields hit a post-war low in the summer and are now rising. Mr Trump’s inflationary policies, and the increased likelihood of a rise in interest rates by the Fed next month, can only increase that pressure.
I caught up last week with David Pinkerton, the chief investment officer of Abu Dhabi-owned Falcon Bank and one of the shrewdest of market readers. He confirmed that equities were likely to benefit during the new presidency, at least initially, and highlighted health care, financial services, energy, infrastructure and defence as the most attractive sectors.
He also highlighted the new risks in bonds, and especially emerging market debt, which stand to lose from reduced global capital flows and trade. For a detailed look at these markets, where better to go than to Emirates NBD Asset Management, the biggest regional asset manager and a specialist in Middle East markets.
The team at ENBD called the new presidency an “unfortunate incident” and said Hillary Clinton would have represented a higher level of certainty in markets. But it also said that, in investment terms, it was “agnostic” about the Trump presidency.
Higher levels of volatility could spook markets, for sure, but there were some pluses for the region from Mr Trump’s policies. Commodity markets (ie, oil) would benefit from any US fiscal stimulus, for example.
Nonetheless, there was a vague feeling that ENBD was grasping at straws to find positives from the looming Trump era. They hoped that his campaign rhetoric might not be reflected in pragmatic policymaking; were uncertain on the prospect for currency wars as a result of the rising dollar, and concerned about the uncertainties of a Trump foreign policy in the region.
The positives were in the continuing process of transformation in Saudi Arabia and the high economic growth rate of India, neither of which is an obvious casualty from a Trump White House.
The final word goes to the experts at Capital Economics, who thought that most of the negative effects of the Trump presidency would be felt by Mexico and China and that the fiscal stimulus would carry the US economy, and the world, through for the next couple of years.
The real unpredictability comes in the second half of his term, CapEcon said, when his thoughts are on running for a second term.
Those last two words alone are enough to spook anybody.
fkane@thenational.ae
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