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Global Investing in a Trumped-Up World

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Global Investing in a Trumped-Up World

Written by: Sharon Fay

It’s just a few weeks since the US election, and the market has already discounted a number of things. I suspect the market’s gotten ahead of itself in some ways. And so what we all need is a little more clarity on real policy details. But I wouldn’t be surprised if some of the quick movements get kind of reversed in the short term as people reassess, and over the course of 2017, I think clients and investors will have more opportunity to strategically reposition their portfolios.

The flavor of where governments are going to start to move their economies—you’re going to see it in the US first. And the truth is, what happens in the US economy has huge knock-on effects in the rest of the world, right. We are a major trading partner to lots of economies and so to disregard this would be a mistake.

So if we stay in a very modest growth environment—which could definitely be where we are after an initial stimulus period—is the strategies that are really concentrated on identifying long-term secular growers are going to continue to do well because we’re going to be once again in an environment with modest to limited growth, and there will be a premium to those companies that can really grow sustainably over a long period of time.

But—I think as you know well—by the time you know exactly what’s going to happen, it’s already been priced into the assets. And so there is a certain amount of understanding that the future is likely to be different than the recent past and therefore taking some risk in assets that have underperformed. So value strategies come to mind. They just really haven’t worked since the global financial crisis. Given the change in direction, I think it’s very likely that they will start to work again, and they have over the course of this year. And that’s been accelerated, and so you would ignore something like that at your peril.

We’re also in an environment today where there is a lot of political uncertainty, and I’d say still policy uncertainty. And so the thought that the markets might be at least as volatile as they have been—perhaps even a little more volatile, given this uncertainty—means you don’t want to abandon strategies that give you some downside protection, because you’re going to experience some of that. And so I think that this is an environment where you want to make sure you have a balance of different exposures in the portfolio.

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