By Naomi Rovnick
LONDON (Reuters) – Major global investors are exiting popular trades betting on new U.S. President Donald Trump’s tax and tariff policies that will boost Wall Street and damage abroad, targeting some of the biggest market victims of the November 5 elections.
After U.S. stocks and the dollar bounced off Trump’s growth agenda and trade war fears pressured Chinese, European and emerging markets, money managers are looking for bargains in places where the pessimism may have gone too far.
“The argument that Trump is good for the US and bad for the rest of the world is a common narrative,” said John Roe, head of multi-asset funds at Legal & General Investment Management, which runs 1.2 trillion pounds ($1 .52 trillion dollars) manages. ) of investments.
He said this convinced him to buy non-US assets that may have been oversold – such as European carmakers and the Mexican peso – and close pre-election positions that benefited from falling British and Chinese technology stocks.
European auto shares hit their lowest in almost two years on Wednesday, while the Mexican peso has fallen more than 2.5% against the dollar this month and the pound has fallen about 5% against the dollar since late September. dollars.
Shaniel Ramjee, multi-asset co-head at Pictet Asset Management, which manages 254 billion Swiss francs ($285.43 billion) of client funds, said he has increased his holdings of Chinese stocks and Brazilian bonds since the election.
“There will be very good opportunities for assets that have been weakened before and after the elections. We see a lot of value,” he said.
Investors are now questioning the popular market view that Trump will pursue aggressive policies that will worsen U.S. inflation and derail the Federal Reserve’s interest rate cuts, given voters’ anger over the cost of living and the rise in consumer prices.
Too far?
Since the eve of the election, US stocks are up more than 4%, while European stocks are down about 1% and emerging market stocks are at their lowest level in two months.
“The news flow (for non-US markets) is so negative right now that any kind of good news can move things quickly,” said Morningstar European equity strategist Michael Field.
The euro, which has fallen about 3% since Trump’s victory, hit a one-year low of $1.052 this week and US 10-year Treasury yields rose 14 basis points (bps) to 4.47%, as traders bet on higher US interest rates and inflation.
Europe is mired in pessimism, exacerbated by the collapse of the German government and fears for exporters, with Volkswagen shares trading at around 3.3 times expected earnings and European chemical makers down 11% since late September.
