Emerging markets most popular despite Trump concerns

November brought us a new president in the name of Donald Trump, a man famous for his business empire but untried in the political arena and widely known for his ‘protectionist’ approach to trade, which is expected to impact exports for many emerging markets.

Asia felt the first blow when Trump announced the US would not continue with the Trans Pacific Partnership, which aimed to give 11 Asia Pacific countries including Singapore, Vietnam and Japan better access to the US market and was forecast to meaningfully boost economic growth in the region.

Emerging market currencies and equities suffered in the wake of Trump’s election and the US interest rate rise, which saw the US dollar strengthen against most global currencies. Uncertainty now reigns as we wait to see how many of Trump’s campaign ‘promises’ will be exercised after his inauguration to the White House.

Time to buy or sell?

Some investors have seen the uncertainty as a sell indicator, some have flocked to safe haven assets to minimise portfolio impact, and some have seen an opportunity to buy. FundCalibre visitors very much belonged to the latter group it appears, with over half of our December poll respondents selecting emerging market equities as the area in which they’d invest in 2017. James Donald, manager of Lazard Emerging Markets fund, recently discussed why he believes the investment landscape in emerging markets still looks strong despite slowing growth in some economies.

Developed market equities are the next most popular, with 28% of respondents intending to invest in them during 2017. These markets are by no means free of uncertainty themselves in 2017, as the implications of Trump’s presidency, Brexit and the ‘no’ vote in the Italian referendum will all play out. Investors will do well to take a long-term view and remember that good funds will have their ups and downs, while keeping an eye out for pockets of opportunity as they arise.

Bonds, property, commodities and cash all received less than 10% of the vote. With interest rates remaining at all-time lows around the developed world, the outlook for bonds continues to be grim. Meanwhile various property funds had to suspend trading after Brexit as many people sold off investments in the asset class after the surprise outcome. With income from cash also at all-time lows, the incentive to hold that asset seems to have decreased, leading many investors to look to equity funds for income.

With plenty of potential banana skins upcoming this year, it is important investors stay calm and diversify. Ensure you understand currency risks and read our guide on investing when the market is volatile.

The views of the author and any people interviewed are their own and do not constitute financial advice. However the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Before you make any investment decision make sure you’re comfortable and fully understand the risks. If you invest in fund or trust make sure you know what specific risks they’re exposed to. Past performance is not a reliable guide to future returns. Remember all investments can fall in value as well as rise, so you could make a loss.