PA ANALYSIS: Should bears buy bond proxies on weakness?

Added 17th November 2016

If a week is a long time in politics, then in markets it can make or break a trader, while heightening the contrarian instincts of investors with a longer-term view.

PA ANALYSIS: Should bears buy bond proxies on weakness?

In the days since we woke up to the realities of President Trump, markets have indeed moved in mysterious ways.

As Oaktree Capital’s renowned bond investor Howard Marks asked: “How could the expectation of a Clinton victory make stock prices rise, and then the reality of her defeat make them rise further?”

While all logic tends to go out of the window when making market predictions, there are nevertheless good reasons for a rally.

Marks is intrigued by Trump’s pro-business agenda, including reduced income tax rates on corporations and big earners and tax ‘holidays’ for corporations bringing in profits stranded abroad.

There are also promises of a reduction in business regulation, with less pressure on healthcare companies to cut prices and a softer stance on banks. Predictably, both sectors rallied immediately following the election result.

"There are plenty of commentators nervous of a possible global recession in the next 18 months"

Says Marks: “At the bottom line – if everything works as promised – there will be massive fiscal stimulus; big increases in GDP growth, corporate profits and jobs; higher inflation than otherwise would have been the case; a big increase in the national debt; and more of everything for everybody”.

It’s hardly a contrarian view to suggest that one or two, or indeed all of these policies and predictions will backfire, and there are plenty of commentators nervous of a possible global recession in the next 18 months.

Kames Income Hub

home_research_centre

Vincent McEntegart, manager of the Kames Diversified Monthly Income Fund, explains how he aims to deliver a stable and sustainable income of 5% p.a.*, paid monthly, by investing in a range of asset classes

Square Mile Research

Fidelity Emerging Markets Fund
Fidelity Emerging Markets...

Talking Factsheets is a video service for users...

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Gary Shepherd

Editor

Portfolio Adviser

Gary joined Last Word Media in 2009, becoming editor of Portfolio Adviser a year later. Previously, he worked at Incisive Media with roles across its Professional Adviser, Investment Week, Bloomberg Money and Mortgage Solutions titles. Gary has been shortlisted for various awards, winning Headline Money Investment Writer of the Year in 2010.

Profiles

Viewpoint

Investment Strategy

Feature

Tweets

Events

PA Emerging Markets 2017
PA Emerging Markets 2017

Tuesday 7 February
Bloomsberry Street Hotel, London

Sponsored Content

Investment Strategy

OTHER STORIES FROM LAST WORD...