The volatility post the US election is favourable for markets and investors, according to fixed income fund manager, Ardea Investment Management.
Stock markets had already increased their expectations that they would now exist in an environment that was more favourable for business and corporate profits, the firm said.
Bond yields and the inflation linked bond market were also both rising as investors began to price in the rising fiscal spending plans of the US, under a Trump Presidency.
Ardea Investment Management’s principal, Tamar Hamlyn said: “More fiscal spending means more debt, more issuance, and ultimately more inflation due to the additional demand that fiscal spending creates”.
Trump was likely to succeed in cutting corporate and personal taxes and raising tariffs. Loosening of the fiscal policy (tax cuts) would boost economic activity in the US and elsewhere, Hamlyn said.
“Raising tariffs is bad, however… China’s export-led growth model and the US’ debt-financed consumption model were healthy for neither — a rebalancing between these two would be positive, and this already appears underway,” Hamlyn said.
Trump’s election would also boost private investment activities, as companies may now be willing to undertake more investment, as there was a unified Republican US Government, Hamlyn said.
When it came to the Fed, as Trump planned to loosen fiscal policy, the economy would run even hotter than it would have done under a Democrat victory.
“So if anything the Fed may feel the need over the coming year to tighten monetary policy more quickly than otherwise,” he said.
