Markets shrug at Trump victory

Fears of a Trump victory grew as election day drew closer, but in spite of this reactions to the news were close to insignificant when markets opened. “Business as usual” say three Sparinvest experts in a comment to the US election.
“The result comes as a bit of a surprise, but markets have only responded subtly to the news during the first hours of trading,” says Sparinvest Chief Strategist David Bakkegaard Karsbøl.

Apparently, markets see the election outcome as business as usual, he explains.

“We have only seen limited movements in currencies, stocks and bonds, so if you woke up this morning not knowing that we had just had a US election, it would be difficult to tell from the actual market developments,” he says. 

Despite of possible trade barriers and strict labour market policies, the election result may hold something good in store for investors – among other things because of Trump’s tax plans. 

“Trump has declared that he will lower corporate tax by a whopping 20 percentage points from 35% to 15%. From an investor point of view, this is good news since it will benefit stock markets, productivity and investments in the US,” he says. 

Interest hikes probably not postponed

Fixed-income markets have also responded calmly to the news, leaving 10 year US rates roughly unchanged. The same goes for short-term interest rate expectations. Senior Portfolio Manager Kristian Myrup Pedersen describes developments as a “non-event” for fixed-income markets.

“One could have thought that Danish kroner could have been used as a safe haven by investors as seen during other crises like Brexit, but that has not been the case at all, he says.

Consequently, Fed President Janet Yellen will probably stick to the original plan and hike rates soon.

Limited impact on equity funds

“Our equity funds have only taken very limited losses, both in absolute and relative terms – and some have even outperformed their benchmark,” says Deputy CIO Jens Moestrup Rasmussen.

He highlights that all investment teams have prepared carefully for the event, running various tests on all portfolios prior to the election.

“We performed at number of stress-tests up to the election, simulating both a Trump and Clinton victory and these indicated that our portfolios were robust, no matter the outcome. So we are pleased with that, which is also reflected by our performance today,” he concludes.