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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.

Multi-Strategy Fixed Income

The Trump victory is clearly a surprise to markets, and what is perhaps most surprising of all is the fact that he won in convincing fashion, including notching many “down ticket” victories. While futures markets reacted violently as the votes were counted and a Trump win became increasingly likely, markets seemed to have settled – at least at the time of writing.

It’s undeniable that Trump’s victory is representative of a greater, global populist movement that must be taken seriously, and we should not discount the likelihood of similar outcomes in the likes of Italy, France and possibly even the U.K. (depending on the Brexit path).

However, it remains highly uncertain how much of Trump’s campaign rhetoric on issues like trade, taxes and immigration can ultimately be implemented. Republican majorities in both the House and Senate should help, but the divisive nature of the campaign means that Trump will need to repair key relationships -- including with Speaker Ryan -- before the party can be expected to fall in line. In a “best case” scenario, a Trump administration would move cautiously on trade reform and immigration while expediting fiscal spending packages and prioritizing deregulation. We would anticipate that fiscal spending could be funded in part by earnings repatriation and we’ll be closely monitoring the impact this could have on corporate debt issuers.

Transition appointments will help to shed light on: 1) how prepared Trump is to govern vs. campaign, and 2) exactly what direction he will take. We’ll be monitoring these to help decipher the implications for global fixed income markets.

Overall, we believe the U.S. economy remains in a reasonably healthy condition and corporate earnings remain fairly robust. While some of the issues I’ve discussed could result in volatility in rates, currencies and other markets, we’ll also likely see opportunities arise and that’s why we believe an active management approach to fixed income markets is particularly apt in such an environment.

 

David Nagle, CFA

Head of Multi-Strategy Fixed Income

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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