“The prospect of a stronger US dollar and protectionist measures when Donald Trump becomes US president in January, has put the recovery in emerging markets on hold, at least in the short term”, comments Jeremy Podger, manager of Fidelity Global Special Situations, which is on the Chelsea Selection.
In his outlook for the coming year, Jeremy has said that he is still positive on emerging markets in the medium to longer term and believes the impact of the new US government is likely to be temporary.
Trump’s impact on US equities has been positive. According to Jeremy, “Recent investor sentiment towards equities improved markedly after the Trump victory in the US presidential election, with his proposals around fiscal stimulus and protectionist policies being viewed as reflationary for the US economy. This makes US domestic businesses relatively attractive and this is reflected in the new relative highs such stocks have been hitting.”
In Japan, Jeremy believes investors should not ignore the potential of secular growers. “Having profited from both domestic reflation plays (immediately after Abe’s election at the end of 2012) and exporters (during periods of yen depreciation), we are now on the lookout for domestic growth names which have lagged similar stocks elsewhere in the world.”
Another currency that has seen volatility this year, our own pound, appears to have stabilised for now. “The UK economic outlook remains uncertain,” he continues. “We are on the lookout for exporters likely to benefit from a weaker currency but are in no rush to increase allocation.”
“Continental Europe has emerged as the loser following political events this year and faces further election uncertainties in coming months. Market valuations there remain polarised, with defensive stocks still trading at rich valuations and cyclicals reflecting pockets of value. Here we currently favour corporate change situations and infrastructure spending beneficiaries.”