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.
Small Cap Equities
It will take time for Donald Trump’s shock victory to sink in among investors around the world. The new Republican president-elect’s pronouncements during an ill-tempered campaign are bound to create volatility, but only time will tell if the trade tariffs and immigration controls announced in his many campaign speeches will now become U.S. policy.
What Trump’s victory should not change is the long-term attractiveness of quality growth companies in the international small-cap space in which we invest. Our focus remains on investment opportunities in companies, rather than positioning our portfolios to reflect macroeconomic news, and we are therefore unlikely to markedly change our views in light of today’s result. We will, however, carefully consider the risk implications of what has taken place. It is also worth remembering, however, that equity markets have a habit of overreacting to such newsworthy events and the immediate repercussions may not reflect the long-term impact of this result.
While the dust settles on this election, regardless of its longer-term repercussions, we will continue to source attractively priced companies with the potential for strong long-term earnings growth, well-defined business franchises, robust balance sheets and proven management. Companies with these characteristics have businesses that are “self-help” in nature, and are not overly impacted by the economic and market backdrop, helping them to deliver superior returns. Such companies also have the potential for a degree of resilience in the volatile months that may lie ahead.
Nicholas WilliamsHead of Small Cap Equities
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