A victory for Donald Trump in the upcoming US Presidential election is likely to create buying opportunities in the US, argues Ryan Paterson, a research analyst at Thesis Asset Management.
However, Paterson notes that some of Trump’s policies are quite positive for business and the economy.
“Reducing corporation tax rates to 15 percent and unleashing massive infrastructure spend would benefit both company earnings and prospects for the economy,” he said.
Thesis portfolios are currently underweight US equity markets as it sees heightened volatility surrounding the election and a potential interest rate rise by the Federal Reserve.
“Should we see substantial falls, on the back of an unexpected result, we are likely to view this as a buying opportunity,” Paterson said.
“Trump is pro-business: lighter regulation coupled with lower corporation tax should prove supportive to equity markets.
“In addition to this, the US backdrop offers some comfort, reflecting better economic growth, rising relative earnings and more favourable sector composition, with higher market weightings in technology and healthcare, along with a healthier financial sector.”
Paterson does, however, note that concerns do lie with Trump’s protectionist views and how the world might handle relations with him if he does move into the White House.
“In many countries, the idea of a special relationship with a Trump-run Washington is frankly a political nightmare.”
On the other side of the debate, Paterson sees a victory for Hilary Clinton resulting in a favourable outcome for risk assets, as investors breathe a collective sigh of relief.
Nevertheless, Paterson believes this continuity would leave the door open for the Fed to raise rates later this year, which is likely to see treasuries and equities simultaneously come under pressure.
“Furthermore, Clinton has been very vocal on healthcare, expressing her dislike of certain pricing practices,” Paterson said.
“We have already seen this weigh on the pharmaceutical sector and if the Democrats end up taking control of the White House, Senate and the House of Representatives, there may be pressure on Clinton to push forward further reform and restrictions on the private sector.”