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Why this fund manager is ditching US equities ahead of Trump presidency

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US shares are up 6% since Donald Trump’s surprise election win in November, but one fund manager says he will not be following the “Trump-inspired rally”.

Nick Peters, multi asset portfolio manager at Fidelity International, has been selling US equities ahead of the President-elect’s inauguration this week.

He said: “As Trump moves in the Oval Office, investors face the choice of whether to fade out from US equities, or follow the Trump-inspired rally. To be a follower, you have to believe his proposals will translate into US growth and that they will not be derailed by tightening financial conditions or restrictive trade policies.”

Peters said he has decided to “fade out” and take profits because good news regarding US growth is already priced in.

“I felt that markets were pricing in a pessimistic view of satisfactory data in 2016. Today, it feels more like an optimistic interpretation of strong data. As such, we could be in for some market upsets with increased volatility ahead. As 2016 shows, however, even politically volatile years can be rewarding for investors.”

In terms of individual sectors, Peters said industrials, which have risen 8.7% since the election, with expectations of greater infrastructure spending, could be in bubble territory.

He said the outlook for S&P 500 financials, which are up 17% since November, is more promising, thanks to rising interest rates and possible repeal of regulation leading to an increase in financial activity.

Utilities and consumer staples, which have been relatively flat since Trump’s win, look set to underperform the market because of higher interest rates, he said.

Peters is turning to Europe for value.

“The region is already benefitting form a positive domestic growth story and Europe tends to benefit disproportionately from a pick-up in global growth.

“Political risks mean that investors should consider their European exposure very carefully however.”

Annualised returns of S&P 500 during presidencies 1929-2017

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