Woodford expects healthcare boost after Trump win

Added 9th November 2016

Neil Woodford expects returns from the bullish healthcare allocation in his three funds could now pick up following today’s win for Donald Trump.

 Woodford expects healthcare boost after Trump win

He said based on an initial view, his fundamental positioning in the Equity Income, Equity Income Feeder and Patient Capital Trust portfolios, would remain unchanged.

The healthcare industry has hampered performance for much of this year as the market worried about Hillary Clinton and her proposals around drug pricing.

Yet Woodford said: “I remain confident in the positioning of the portfolios and their ability to deliver attractive returns over the long term. Clearly, our significant weighting towards the healthcare industry has weighed on performance for much of the year, as the market has fretted about the prospect of a Clinton presidency and what that may mean for drug pricing. Now the outcome is known, the prospect of drug pricing legislation is off the agenda. Meanwhile, in California, proposition 61 which would have limited the price of prescription drugs in the State, has been voted down. From a sentiment perspective at least, the news should be positive for this important part of the portfolio.”

He said the markets appear to have controlled their knee-jerk reactions, having learned from Brexit, as Trump’s victory resulted in a fairly muted response.

As he urged investors not to over-react, the chief investment officer at Woodford Investment Management said the result was as much a success for Trump as it captured widespread anti-establishment sentiment.

“I am surprised that Donald Trump has emerged as the winner of the US presidential election – not many people saw it coming. This result once again calls into question the ability of forecasters and pollsters to accurately predict event outcomes and capture the extent of discontent and frustration that now prevails across Western democracies.

“In that respect, as much as this election result is a vote for Trump, in my view, it is also a vote against the political establishment from a large part of society that is angry that policy has done little to help it since the global financial crisis.

“It is likely that there will be policy changes now and, although it is difficult to have immediate clarity on what these will be, we should expect a more inclusive domestic growth agenda will emerge.”

Woodford said the strong run in emerging markets this year might now come to an end and globalisation comes into sharp focus and US domestic interests take precedence.

Woodford points out that much of Trump’s campaign rhetoric cannot be delivered due to the constraints of office, and “checks and balances” may hamper the more protectionist aspects of his agenda.

He said the result makes a December interest rate rise less likely, and the uncertainty that will now ensue – globally and particularly in emerging markets - would weigh on the Federal Reserve’s decision.

Woodford said a US recession was unlikely.

“Overall, I expect the momentum in the US economy to continue. I expect modest growth in 2017, relatively muted inflation and, with the prospect of a slightly more stimulative fiscal policy and the absence of rate hikes, I don’t think a Trump presidency foreshadows a US recession.

Further, Woodford concluded investors could expect further surprises from the forthcoming European elections.

“It would be wrong to assume that America has a monopoly on disgruntled voters and we will keep a very close eye on political developments.”

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