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Robeco Advise Investors Post US Election Result

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Donald Trump Sr. at #FITN in Nashua, NH by Michael Vadon via flickr

Robeco suggest that investors should adopt a defensive stance towards stocks following the managers.

“Going in to the US elections, we considered US equities to be fully priced,” says Mark Glazener, Head of the Global Equity team and fund manager of the Robeco NV fund. “In terms of growth we expected a muddling-through scenario, as indicated by business confidence indicators. The ISM manufacturing PMI in the US had dipped below 50 in August and had since recovered, without showing a clear direction.”

“The Senate that seemed to be a comfortable win for the Democrats now remains Republican. The House, as expected, stays Republican as well, and the Presidency against all odds goes to Donald Trump. This is a landslide victory for Trump and the Republicans.


“As expected, equities around the world are under pressure. Equities and the economy are based on confidence and confidence will be fragile.”

“Investor concerns focus on Trump’s anti-trade and immigration policies. If he continues his rhetoric on protectionist trade policy, this might be the trigger for a long awaited recession in the US economy. Trump’s policies are partly unknown and his team even more.”

Winning short-term position

“A defensive stance will be the winning position for the short term. A weakening US dollar will dampen the fall of US equities. The health care sector will show a sigh of relief as Clinton’s drug pricing plans will now be off the table. Trump has promised a big infrastructure spend, so building-related names will do well. The big question is what will financials do? The first indications are that the 10-year bond yield in the US is declining, as a symbol of a flight to safety. This will not play in to the cards of banks.”

“The initial reaction will therefore be negative. Whether this will continue all depends on the stance of President-elect Donald Trump and the choice and stability of his team. If the new policy will circumvent a protectionist trade stance and aims for market-friendly practices, significant policy stimulus, tax reforms and fiscal stimulus, the final outcome will not be that bad. A first signal of this will be the reparation of relations with the Republican Party, which now controls policy with a majority in the House and the Senate.”


Emerging markets ‘stunned’

“A Trump victory does not bode well for emerging markets equities, and we expect a first negative market reaction and overall shorter term volatility, as markets will be stunned by the results of the US elections,” says Fabiana Fedeli, Senior Portfolio Manager for Emerging Markets Equities.

“In the short term we could see further US dollar weakness. However, in the longer term, if Trump sparks a risk-off scenario in equities, assets could flow back to the US, and this perversely would have a positive impact on the US dollar versus many other currencies, including those of emerging markets.”

“Across all emerging markets we expect Mexico to show the most negative reaction, and this should affect first and foremost the country’s very liquid currency market, triggering a sharp decline in the peso, and secondly the equity market. After the Mexican peso, the Brazilian real is the most exposed currency given the country’s dependency on foreign capital flows,” says Fedeli.

“Eventually, we expect the overall volatility across most emerging equity markets to subside once the market focuses on fundamentals. That said, we are likely to see occasional volatility spikes and market jitters ahead, triggered by any instances of Trump’s incendiary rhetoric on foreign politics or any steps of his administration in favour of protectionist measures.”

US not-so dominant

Fedeli says the reason for expecting a normalisation across most emerging markets is that, notwithstanding the new administration’s protectionist stance – Trump is against the Trans-Pacific Partnership and wants to increase tariffs for Chinese goods – the US is not as dominant as a trading or investment partner as one might think. First, it accounts for 12.8% of emerging markets exports, down from 14.9% ten years ago. Second, across most emerging markets the role of US Foreign Direct Investments has diminished considerably since before the Global Financial Crisis.

“The exception to this is Mexico, which is far more dependent on the US as a trading partner, a source of investment flows, as well as a destination for its migrant workers,” says Fedeli. “If a Trump administration stays true to its campaign statements of renegotiating or withdrawing from the NAFTA agreement and deporting all undocumented migrants living in the US, the Mexican economy could be significantly damaged.”

“Given that exports to the US account for about 28% of Mexican GDP, US Foreign Direct Investments for 1.4% and remittances from the US account for approximately 2.1% – although not all the remittances are from undocumented workers – markets would perceive a Trump win as a disaster for the Latin American country, and the impact on its currency and equity market would last longer. In addition to NAFTA, Trump indicated that he wants to revise other trade agreements. In Latin America, other exposed countries are Peru and Colombia as they both signed Free-Trade Agreements with the US.”

NAFTA withdrawal: a game changer

“While a withdrawal from NAFTA and other agreements would be a game changer for Mexico and upset Andean countries, for other emerging markets the focus of US companies on their bottom line could to some extent offset any protectionist measures a Trump government would implement. This is due to an improvement in labour cost competitiveness with the US,” Fedeli says.

“Trump has promised a 38% increase in US minimum wages at a federal level. While only a small number of workers are subject to federal minimum wages, there would likely be a corresponding increase in minimum wages in some states. In addition, in Trump’s case the increase would be paired with a loss of cheap jobs should the undocumented migrant workforce, which is estimated at 7% of the total US workforce, be deported. An upward impact on wage growth would also occur if overall immigrants making up 17% of total US workforce were to be reduced by more cumbersome visa procedures. This could push some US exporters to move production outside of the country.”

Foreign policy: a worry

“All that said, while the direct economic impact of a Trump presidency on most emerging markets (except Mexico) would be relatively contained, a key concern is Trump’s potentially damaging impact on US foreign policy and, as a consequence, on world geopolitics. We live in a world of delicate political balances, such as the UK Brexit, the Syrian conflict and Russia-Western world hostility, the rise of a more authoritarian and nationalistic Presidential power in China, the territorial disputes in the South and East China Seas.”

“The US still fills an important role within many of these delicate balances and Trump’s commentary on foreign policies would bring us in unchartered waters. Importantly, Trump’s tendency to ‘shoot from the hip’ when it comes to foreign policy commentary, would make him the classic dancing elephant in the crystal shop.”

But there may be one potential silver lining to this, she says. “US Presidents don’t have a particularly good record of keeping their campaign promises, and therefore many of Trump’s explosive campaign pledges might end up being difficult to implement in practice. However, with a Republican majority both in the Senate and in the House of Representatives, the silver of the lining might prove to be not as shiny.”

Economy

A Good Look At How Homes Will Become More Energy Efficient Soon

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energy efficient homes

Everyone always talks about ways they can save energy at home, but the tactics are old school. They’re only tweaking the way they do things at the moment. Sealing holes in your home isn’t exactly the next scientific breakthrough we’ve been waiting for.

There is some good news because technology is progressing quickly. Some tactics might not be brand new, but they’re becoming more popular. Here are a few things you should expect to see in homes all around the country within a few years.


1. The Rise Of Smart Windows

When you look at a window right now it’s just a pane of glass. In the future they’ll be controlled by microprocessors and sensors. They’ll change depending on the specific weather conditions directly outside.

If the sun disappears the shade will automatically adjust to let in more light. The exact opposite will happen when it’s sunny. These energy efficient windows will save everyone a huge amount of money.

2. A Better Way To Cool Roofs

If you wanted to cool a roof down today you would coat it with a material full of specialized pigments. This would allow roofs to deflect the sun and they’d absorb less heat in the process too.

Soon we’ll see the same thing being done, but it will be four times more effective. Roofs will never get too hot again. Anyone with a large roof is going to see a sharp decrease in their energy bills.


3. Low-E Windows Taking Over

It’s a mystery why these aren’t already extremely popular, but things are starting to change. Read low-E window replacement reviews and you’ll see everyone loves them because they’re extremely effective.

They’ll keep heat outside in summer or inside in winter. People don’t even have to buy new windows to enjoy the technology. All they’ll need is a low-E film to place over their current ones.

4. Magnets Will Cool Fridges

Refrigerators haven’t changed much in a very long time. They’re still using a vapor compression process that wastes energy while harming the environment. It won’t be long until they’ll be cooled using magnets instead.

The magnetocaloric effect is going to revolutionize cold food storage. The fluid these fridges are going to use will be water-based, which means the environment can rest easy and energy bills will drop.

5. Improving Our Current LEDs

Everyone who spent a lot of money on energy must have been very happy when LEDs became mainstream. Incandescent light bulbs belong in museums today because the new tech cut costs by up to 85 percent.

That doesn’t mean someone isn’t always trying to improve on an already great invention. The amount of lumens LEDs produce per watt isn’t great, but we’ve already found a way to increase it by 25 percent.

Maybe Homes Will Look Different Too

Do you think we’ll come up with new styles of homes that will take off? Surely it’s not out of the question. Everything inside homes seems to be changing for the better with each passing year. It’s going to continue doing so thanks to amazing inventors.

ShutterStock – Stock photo ID: 613912244

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Economy

IEMA Urge Government’s Industrial Strategy Skills Overhaul To Adopt A “Long View Approach”

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IEMA, in response to the launch of the Government’s Industrial Strategy Green Paper, have welcomed the focus on technical skills and education to boost “competence and capability” of tomorrow’s workforce.

Policy experts at the world’s leading professional association of Environment and Sustainability professionals has today welcomed Prime Minister Teresa May’s confirmation that an overhaul of technical education and skills will form a central part of the Plan for Britain – but warns the strategy must be one for the long term.

Martin Baxter, Chief Policy Advisor at IEMA said this morning that the approach and predicted investment in building a stronger technical skills portfolio to boost the UK’s productivity and economic resilience is positive, and presents an opportunity to drive the UK’s skills profile and commitment to sustainability outside of the EU.


Commenting on the launch of the Government’s Industrial Strategy Green Paper, Baxter said today:

“Government must use the Industrial Strategy as an opportunity to accelerate the UK’s transition to a low-carbon, resource efficient economy – one that is flexible and agile and which gives a progressive outlook for the UK’s future outside the EU.

We welcome the focus on skills and education, as it is vital that tomorrow’s workforce has the competence and capability to innovate and compete globally in high-value manufacturing and leading technology.

There is a real opportunity with the Industrial Strategy, and forthcoming 25 year Environment Plan and Carbon Emissions Reduction Plan, to set long-term economic and environmental outcomes which set the conditions to unlock investment, enhance natural capital and provide employment and export opportunities for UK business.


We will ensure that the Environment and Sustainability profession makes a positive contribution in responding to the Green Paper.”

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