Trump’s inauguration speech is clear: American First – both for American jobs and American goods. This means more protectionism and less free trade. The best way to assess Trump’s first 100 days is to look at what he can implement – in the context of what needs approval by Congress as well as the complexity of drawing up the policies.

1. Market Watch – February 2017
Trump’s inauguration speech is clear: American First – both for American jobs and American goods. This
means more protectionism and less free trade. The best way to assess Trump’s first 100 days is to look at
what he can implement – in the context of what needs approval by Congress as well as the complexity
of drawing up the policies.
The President can sign executive orders on trade policies. Trump has left the Trans Pacific Partnership; he
can call China a currency manipulator; and he can order renegotiation of the North American Free
Trade Agreement. However, market-friendly policies like fiscal reform and deregulation are more
complex and need Congressional approval.
Therefore, Trump is likely to front-load his anti-trade policies, creating more market uncertainty, while the
good policies, such as fiscal reform and deregulation, could come later. This could threaten market
stability, as the focus since the election has been on the positive aspects of Trump’s policies.
Looking beyond unpredictable US politics, what is clear is that both reflation and growth globally have
picked up. This implies a healthier business environment for firms, but brings the risk of higher interest
rates, which is at the heart of our investment strategy. At the same time, we want to stick with
investments that could see an added boost from Trump’s fiscal thrust and deregulation.
We maintain our moderately defensive asset allocation stance, preferring credit over equity. On bond
portfolios, we think now is the time to position for reflation, by increasing to an overweight call on
developed market high yield bonds and cutting to a neutral position in developed market investment
grade bonds.
We remain underweight equities and we don’t want to chase the broad market rally. Instead we want
to be more selective – looking at sectors and companies that gain from the economic recovery,
reflation and regulatory changes. In this respect, we think US consumer discretionary and technology
can benefit from the current economic recovery and those companies with pricing power can do even
better in an environment of rising prices.
Buckle up! It’s going to be a tumultuous ride in the first 100 days of President Trump!
Marc Van de Walle
Global Head of Products
Investing in Trump’s first 100 days
STRATEGY
Remain cautious. Trump’s
bad (trade) policies can
be implemented faster
than the good (fiscal
reform) ones
FIXED INCOME
Position portfolios for
reflation, with emphasis
on credit risk. Overweight
high yield bonds, neutral
investment grade
FX
Worries of under-delivery
on American fiscal policy
and over-delivery on trade
policy could fuel further
near-term USD correction
EQUITY
Stay underweight
equities. Focus on sectors
with economic or policy
tailwinds, and those with
pricing power

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