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U.S. Elections 2016

Barings’ investment professionals provide insights on how the U.S. presidential election may impact the fixed income, equities, alternatives and real estate markets.

High Yield

While the Trump victory is a surprise to most, it’s important to remember that high yield markets have weathered macroeconomic and geopolitical storms almost continuously since the financial crisis of ‘08/’09. We saw risk flare-ups around the Greek debt crisis, the U.S. credit rating downgrade, the taper tantrum, and most recently, related to energy and commodity distress and the surprise Brexit vote. Each time, the resulting volatility created opportunities for active high yield managers, and increasingly, the market seems to be taking these events in stride. This may be a reflection of views like ours at Barings that fundamentals drive returns over the long-term in high yield markets and that fundamentals, by and large, look stable.

All else equal, a Trump administration may, at least to start, involve more uncertainty than a Clinton administration would have from the market’s perspective as it remains unclear how much of the candidate’s election rhetoric will turn into action and how much will remain just that—rhetoric. Either way, the U.S. political system is set up to have checks and balances, making any quick, radical changes unlikely. Additionally, some of the potential changes, like rolling back regulations and cutting taxes, if enacted, could prove beneficial for some industries.

Overall, we continue to believe that the U.S. and European economies are on reasonable footing and provide a solid backdrop for high yield credit issuers; the surprise Trump victory does not change this. In a similar fashion to the Brexit vote, we would expect to see near-term volatility continue in the days and weeks to come as the market digests the long-term implications. As we have done for other geopolitical shocks, we will be closely monitoring high yield markets for opportunities where credit prices decouple from fundamentals.

 

Mike Freno

Head of U.S. and Global High Yield Investments

Market Insights

High Yield

We anticipate that high yield issuers will largely weather any short-term volatility ...

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Multi Asset

Trump's victory to have a profound effect on global markets ...

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Emerging Markets Debt

We believe the environment remains a healthy one for emerging markets and we continue to see ...

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Multi-Strategy Fixed Income

The U.S. economy remains in reasonably healthy condition and corporate earnings are fairly robust ...

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Private Equity

We don't expect any one political event, such as the U.S. Election or Brexit, to impact our portfolio ...

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Real Estate

At the end of the day, the fundamentals underlying the U.S. real estate market are sound ...

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Global Equities

The investment case for strong companies is not dependent on the president ...

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Infrastructure Debt

Infrastructure spending in the U.S. was one of the issues that both major parties actually agreed upon...

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Structured Credit

Fundamentals are solid & the direct impact of the election are somewhat limited

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Small Cap Equities

Our focus remains on the fundamentals, following a Trump win ...

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Emerging Market Equities

Uncertainty is the big takeaway from Trump's win ...

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Asian Equities

Despite a change of U.S. leadership our outlook for Asia remains strong ...

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