Before Donald Trump was elected the 45th President of the United States, his supporters claimed that he would be ‘good for US business’ and ‘good for the US economy’.
He brought an impressive track record to the White House as a successful media personality and star of The Apprentice; a businessman and property investor worth anything from $3.9 to $10 billion (or so the estimates claimed), despite going bankrupt several times in the 1990s and around the global financial crisis in 2008.
Well were Trump’s supporters right? Yes.
In the past year, equities in particular have delivered some impressive returns, while ‘safe haven’ assets (like gold) have fallen behind, according to research from Fidelity International.
For example, since November 2016, US equities have gone on to deliver a 15.04% return, meaning that had you invested £10,000 in the S&P 500, it would now be worth £11,504.*
However, it’s European equities that have delivered the best returns since Trump was elected. Had you invested £10,000 you would now have £12,263 – a return of 22.63%.*
Asia Pacific equities have followed closely behind, returning 20.36% over the same period, while emerging market equites have also had a surprisingly strong year under President Trump, delivering a 19.79% return.
A £10,000 investment in each of these twelve months ago would now be worth £12,036 and £11,979 respectively.*
Neil Wilson, senior market analyst at FX broker ETX Capital says:
‘A year on since Trump’s election and the rally in equities has been remarkable. This has to a large extent been down soaring corporate earnings and a period of synchronised global growth that has sparked higher prices for commodities and oil.
‘All OECD countries are growing and central banks remain highly accommodative. China also seems to be in a better place with fears around a “credit bubble” very much in the background now. European growth has suddenly ignited and that has little to do with Trump, and more about the ECB’s stimulus finally working.
‘Whilst this is not down entirely to Trump, it’s clear his election victory was the catalyst in that it unleashed animal spirits. The promise of tax reform is important, and seemed the catalyst for a long-awaited global rotation out of bonds and into stocks.’
The collapse in volatility
ETX Capital’s Wilson also highlights that over the past year there has been an absence of volatility within the US financial markets ‘very much against what we would have expected.’
‘The VIX, which tracks the implied volatility in the S&P500, has fallen below 10 and is trading around record lows. The S&P500 itself has been amazingly calm with Tuesday (November 7 2017) seeing the 44th consecutive day without a decline of more than 0.5% for the index – the best run since 1968’, he says.
Below is table showing the best and worst performing asset classes over the past twelve months:
|Asset Class||% Return||Return on £10,000|
|European ex UK Equities||22.63||£12,262.77|
|Asia Pacific Equities||20.36||£12,036.19|
|Emerging Market Equities||19.79||£11,978.72|
|High Yield Bonds||3.14||£10,314.16|
|Emerging Market Debt||-0.83||£9,916.72|
Source: Fidelity International sourced from Datastream, November 2017. % Total returns in GBP 07/11/2016 to 31/10/2017
Tom Stevenson, investment director for Personal Investing at Fidelity International, comments:
‘Had you set up and held a well-diversified equity portfolio, it would have delivered respectable returns over the past 12 months.
‘The gains from shares have more than made up for any losses from bonds, as the interest rate environment has tightened. For anyone looking to build a diversified portfolio, a global equity fund remains a good starting point and will be a sensible core holding for most investors.’
Love him or loathe him, Donald Trump has proved his critics wrong when it comes to certain global asset classes and US indices. The million dollar question is will this Trump rally last? Or will geopolitical uncertainty and the failure to deliver radical economic reforms unnerve investors in the long-term?
*Source: Fidelity International sourced from Datastream, November 2017. % Total returns in GBP 07/11/2016 to 31/10/2017