We believe India could be one of the big winners from Trump being elected. On most risk and export-related models, it is forecast to be the least negatively impacted country from a Trump presidency.
Over the medium to longer-term, Trump carries additional direct risk for the US but his impact could be felt further afield, as most policies indicated so far are stagflationary. This will likely limit the Fed’s monetary (easing) cycle which, combined with tariffs and the impact on trade, would lead to a stronger dollar. Given Trump is trying to front-load growth, he will drive up debt levels in the US, which is likely to turn into a higher term premium in the Treasury market. None of this is long-term bullish for any duration asset.
Outlook
The key question becomes ‘Is this time different?’. The last time we saw even low levels of stagflation, it hit emerging markets harder than the US, the root of the problem, which survived on its so-called exceptionalism. We bow to history but believe fundamentals are on our side. Asian equities have a good chance of becoming the new global growth engine and the anti-debt trade – this is all part of our ‘New Multipolar World’ narrative.
We believe much of the risk is already priced into the market. However, whenever Trump says anything negative about China, there is a risk of markets reacting the following day. Geopolitically, we see more risk to Europe than Asia in the coming period.
On the positive side, underlying economic fundamentals – excluding China – are stacking up nicely and valuation levels are low, reflecting much of the risk already. We believe that eventually fundamentals will prevail. It is interesting to note that during the last Trump presidency, emerging markets and Asia outperformed US small caps (as per the Russell 2000 Index) and gave a positive absolute return.
By Jorry Noeddekaer, lead manager of the Polar Capital Emerging Market Stars Fund
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This is a marketing communication. For investment professionals only. For information purposes only. This material is not intended to provide advice of any kind. Issued by Polar Capital LLP and Polar Capital (Europe) SAS. Polar Capital LLP is authorised and regulated by the United Kingdom’s Financial Conduct Authority (“FCA”) and the United States’ Securities and Exchange Commission (“SEC”). Registered address: 16 Palace Street, London SW1E 5JD. Polar Capital (Europe) SAS is authorised and regulated by France’s Autorité des marchés financiers (AMF). Registered address: 18 Rue de Londres, Paris 75009, France. Some information contained herein has been obtained from third party source and has not been independently verified by Polar Capital. All opinions and estimates constitute the best judgement of Polar Capital as of the date hereof, but are subject to change without notice, and do not necessarily represent the views of Polar Capital, and may not be achieved.
