As Americans prepare to go to the polls to vote in the 2016 presidential election, money managers across the globe are readying their own portfolios for the outcome.
Some executives said they are still thinking about what they might do, largely because they are waiting for more details from the candidates on some issues. And while others have made changes that will benefit from or hedge against either a Hillary Clinton or Donald J. Trump presidency, they are changes that they would have made regardless of the Nov. 8 outcome.
“Normally U.S. elections don't matter — and it's fair to say generally in most places they don't matter,” said Rupert Watson, London-based head of asset allocation at Mercer Investments. “There tends to be a bit of volatility around the result, and then all goes back to normal.”
While sources generally agreed that a vote for Ms. Clinton would result in the status quo, with interest rates set to continue to rise from a 25-basis-point increase in December, managers and consultants largely are focusing on risks around Mr. Trump's election.
“With (Mr.) Trump it is very difficult to know. It is not just that he says some things that potentially could lead to some very bad outcomes, but also that he has no personal experience,” added Mr. Watson.
In general, managers are viewing a victory for Mr. Trump as risk-off for global financial markets. “I think there would be concern that he would pursue an approach to trade that is more protectionist ... and we could see a bit of a reversal in the trend of globalization that we have witnessed in past decades,” said Mark Dowding, partner and co-head of investment grade at BlueBay Asset Management LLP, London, which has $55.3 billion of assets under management. “That could impact economic growth, and lead to elevated risk premia.”
Sources said they are comforted by the fact that the U.S. system deploys more checks and balances than other countries, with Congress potentially able to ward off some unpalatable policies.
“You are likely to have a Congress split between the two parties, which is something that the financial markets typically like because there is compromise, more being done, and more reasonable things are done in terms of new laws and new acts being passed,” said Christophe Nagy, Paris-based head of U.S. equities at Comgest, which has €20.7 billion ($23.2 billion) of assets.
Regarding whether Mr. Trump would be good or bad, and the impact of many uncertain events, Mercer's Mr. Watson added: “I am reminded of the words of Dirty Harry in (the movie) “Magnum Force:” Man's got to know his limitations.”