01/21/2020 | 21:55
In recent years, investors have not been given the anticipation of some election results very well. In 2016, the market did not expect the triumph of Brexit in the United Kingdom or the election of Donald Trump as US president, and many were also surprised in 2018 by the government that emerged from the elections in Italy.
These surprises do not prevent large fund managers from continuing to predict their future political events. At the annual conference with investors that Goldman Sachs organizes in London, this business bank has asked attendees about the possible outcome of the White House elections next November. There was almost unanimity among the 250 attendees; 87% predict Trump will be re-elected.RELATED
This is an expectation that makes investors think of a good year or burst. Since the Republican leader acceded to the presidency, the American park has lived a buoyant stage, encouraged largely by the tax cuts of the Administration in Washington. Any hint of slowing down in an election year will probably cause new fiscal stimuli. In addition, Trump has low pressure on the Federal Reserve (Fed) to cut interest rates, subjecting minimum financing costs.
67% of fund managers at the Goldman meeting anticipate that the Fed will keep rates at the same level as now throughout 2020, while 29% believe that a decline could occur. Only 4% think that the presiding body Jerome Powell will challenge Trump with an increase in the cost of money.
With the Fed in relaxed mode and the US government encouraging the economy, a significant majority of the City's investors foresee new market rises, despite being already at very high valuations. 60% point out that the profitability of the global stock market is between 0% and 10% in 2020, with 21% expecting even higher increases. Only 19% predict falls.
But everything can change after Trump's re-election. The overheating of the economy and markets can give way to a period of correction, according to investors. 45% think that in 2021 a period of bursting will begin, while 27% expect the parks to last until 2022.
According to Goldman's analysts, the near consensus on elections contrasts with market positioning, with futures derivatives anticipating high volatility at the end of this year. "The demand for sales options has increased as investors seek protection from possible electoral hangovers." It seems that many fear that, whether Trump's discounted victory occurs or if there is a surprise and the Democratic candidate wins, then there will be a correction.
Trump's continuity can also facilitate the trade agreement that Prime Minister Boris Johnson wants to seal with the United States to compensate for the possible loss of exchanges with the EU as barriers are implemented after Brexit. Greater collaboration in financial services between Wall Street and the City could be one of the objectives.
(post based on an article published in the print edition of Expansin on January 21)
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