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Trump's Triumph in an Uncertain World 

Election Results 



The incoming US president is a political outsider who wants to make his presence known and upend the status quo. While the markets may like some of Trump's ideas, they value certainty more—and that will be in short supply.

Key Takeaways

  • Until Trump's policies are known, his rhetoric around trade, immigration and international cooperation will threaten US and global economic growth
  • US markets should enter a risk-off environment marked by higher volatility and more demand for gold and Treasuries; hospital stocks could be hit hard
  • Protectionism will be the biggest investment theme, particularly in Asia; we anticipate a flight to quality in Asian bonds
  • European equities could ironically become a bastion of stability compared with the US; in the short-term, expect a risk-off fixed-income environment, lower yields and a flatter curve
Over the past 20 months, the United States has suffered through one of the most divisive and caustic presidential election campaigns in its history—one that has also held the full attention of governments and individuals around the world.

Now, after a long and painful slog, the results are finally known, and Donald Trump is the president-elect of the US. This is a shocking result for millions in America and beyond, and may change the standing of the US in the eyes of the world as the global reverberations sink in. One does not need to be a partisan to see how this will unfold: Based purely on what Trump has said and how he has behaved, it is clear that America's next president will try to shake up the world order. To do so, Trump will not even need to enjoy Congressional support from his own party, which he may not get anyway: As the leader of the executive branch, there is much he can do on his own to upend international relations.

As such, geopolitical risks have just gone up significantly, and the markets will almost certainly react accordingly in the short term. Perhaps even more significant for the markets, however, is the fact that Trump's victory did not occur in a vacuum. It comes during a year of surprises—remember Brexit?—that have flouted not just conventional thinking about globalization, but the entire post-war orthodoxy.

What can investors do?

For their part, investors can avoid creating challenges of their own by not making long-term decisions as the markets digest these results over the coming days; we have recently seen significant market shifts reverse themselves in 24 to 48 hours. That said, investment risks must be managed and opportunities capitalized upon, so here is our view on how the election results could affect economies, markets and investors in the coming weeks.

Trump's historic victory and his rejection of the political status quo have broad implications for the US economy. He sees the world very differently from many of his peers, and while the Republican Congress may not fully support him, he will be able to advance certain aspects of his agenda with few roadblocks.

Investors should keep three points in mind as they gauge the economic effects of a Trump win:

Trump's opposition to the political establishment, combined with a dearth of policy details, significantly accelerates event risk—at least until the markets have more clarity on where he plans to take the country. His extreme rhetoric around trade, immigration and international cooperation threatens not just US growth, but global growth as well.
Trump's presidency could be stimulative for the US economy given his proposals for corporate tax reform and infrastructure spending.
However, Trump's budget proposals could substantially increase the national debt, creating economic headwinds—and potentially higher inflation and interest rates—over the long term.

Investment implications for the US

  • Given the unknowns and unpredictability surrounding Trump, we expect to enter a “risk-off” environment with higher volatility and greater demand for “safe havens” like gold and US Treasuries.
  • Hospital stocks could be hit hard, given Trump's repeated calls to put an end to “Obamacare”.
  • After the initial shock settles, Wall Street will likely look forward to Trump's proposed tax reforms, and to the prospect of some Congressional Republicans counterbalancing some of Trump's more extreme views.
  • Further out, markets will probably start to adjust for deglobalization risks, which could weigh on equities, and inflation risks, which could affect bonds. However, much depends on how effectively Trump can sell his ideas to a Congress that, while Republican in name, may not be entirely on his side.

Investment implications for Asia Pacific

  • With Trump's election, protectionism will be the biggest investment theme; we expect trade flows to collapse over time and tariffs to increase, further hurting Asian countries that rely on exports.
  • Trump will not enjoy political support from most Asian countries, although he may have much in common with President Duterte of the Philippines.
  • Trump is likely to demand that America's allies share the cost of its security guarantees. If that doesn't happen, the US could scale back its presence, giving China the opportunity to flex its muscle. We expect to see a massive increase in Asia's overall defense spending—particularly Japan and Korea.
  • We expect to see a flight to quality in Asian bonds, which will decline in line with US Treasuries.
  • Spreads in Asia will likely grow wider in sympathy with an expected drop in the equity markets, as investors become concerned about Trump's protectionist policies hurting economic growth.

Investment implications for Europe

  • We believe the direct impact of a Trump presidency on European companies could be limited, and Europe may—ironically—become a bastion of stability compared with the US.
  • A Trump victory will likely hurt European companies that derive a significant portion of their earnings in US dollars, as the dollar may weaken from short-term uncertainty.
  • In the near term, we believe the fixed-income market will enter a risk-off environment, causing bond yields to fall and the yield curve to flatten.
  • Longer term, we believe long-dated bond yields will rise, as the markets anticipate significant tax cuts and massive infrastructure spending from a Trump presidency.

Where the world goes from here

This election has been captivating and disturbing in equal measure, raising some uncomfortable questions about the future that are still unanswered. Personality and pejoratives—not policy and purpose—have attracted much of the attention, and a deep divide separates much of America. This suggests that the country's ability to lead the world from here will be in question, although hope remains that the strength of the US Constitution will prevail and create order.

Then again, following the surprising Brexit result and the almost universal distrust in politicians and governments—which will be tested in four important elections in Europe over the next year—we believe we are watching a new theme take root. There is a significant shift in political trends underway, leading to increasing levels of risk from de-globalization, re-regulation, and government interference in markets and corporations. Rising geopolitical fears and trade tensions are set to undermine both investor confidence and corporate capital-expenditure plans, which could slow global growth even more from its already low levels.

We therefore expect our thesis of ongoing financial repression and lower-for-longer interest rates to remain valid, which will leave investors looking for acceptable risk-adjusted returns in a tougher political and macroeconomic environment. This, in turn, will continue reinforcing the need for ACTive management to keep portfolios agile in their asset allocation, confident in their underlying investment processes and thorough in the global research and insights underlying each investment decision.

The material contains the current opinions of the author, which are subject to change without notice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Forecasts and estimates have certain inherent limitations, and are not intended to be relied upon as advice or interpreted as a recommendation.

Allianz Global Investors Distributors LLC, 1633 Broadway, New York, NY 10019-7585,, 1-800-926-4456.


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