Four funds for the optimists
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It’s perhaps no surprise that Donald Trump’s visit to the UK is creating more than a few headlines. Jumping from trade wars to trade deals, ‘good’ potential prime ministers to ‘negative’ ones, the US president has been creating waves.
Here we take a look at some of the items on his agenda and highlight funds that could be an investment trump card.
Never far from the top of his agenda is China and trade tariffs as Trump looks to put “America first”.
The world’s two largest economies have been in an escalating conflict over trade for the past year, but the issue was reignited again last month when Trump increased tariffs once more and tightened trade restrictions on Huawei, the Chinese telecoms giant – which resulted in Google suspending its dealings with the company and raised questions over Huawei being able to expand internationally.
Investment trump card: Martin Lau, manager of First State Greater China Growth says that: “In today’s environment, where market volatility and uncertainty abound, the most important criterion for successful long-term investing is a focus on quality – quality of management, quality of franchise and quality of financials.
As the 31 October deadline approaches for the UK to agree a Brexit deal, Theresa May reminded Donald Trump he suggested she sued the EU. At a joint press conference she said: “The president (last year) suggested that I sued the European Union, which we didn’t do. We went into negotiations and we came out with a good deal.”
Trump replied “I would have sued, but that’s OK. I would have sued and settled, maybe, but you never know – she’s probably a better negotiator than I am.”
Investment trump card: The EU may be next on Trump’s list after China in terms of trade wars, but after 30 years and more than 15,000 discussions with companies about their prospects, Graham Clapp, manager of RWC Continental European Equity fund says he is finding more good opportunities than ever.
The top three countries in terms of weighting in the fund are currently France, Germany and Switzerland*.
President Trump said the US was committed to making a “phenomenal” trade deal with the UK as it leaves the EU. He also said: “When you’re dealing in trade everything is on the table so NHS or anything else, a lot more than that, but everything will be on the table, absolutely.”
The Health Secretary took to Twitter to reply: “Dear Mr President. The NHS isn’t on the table in trade talks – and never will be. Not on my watch. Matt Hancock”
Investment trump card: Polar Capital Global Healthcare Trust co-manager, James Douglas, highlighted on our recent podcast, that Trump’s healthcare agenda and indeed that of any presidential hopeful, could be a risk for the sector in the coming months.
But he also points out the holy grail for all governments in an aging world is to provide more healthcare, for more people, for less money. He said: “We believe those companies that can develop innovative and differentiated therapies can still be commercially successful in the U.S.”
Trump has famously questioned scientists on their views of climate change, suggesting they are politically motivated. He has rolled back environmental regulations, pulled the United States out of the Paris climate accord, and is not expected to complete the rollback of the most significant federal effort to curb greenhouse-gas emissions, initiated during the Obama administration.
Having received a letter from 250 academics, saying Trump’s “reckless approach [to climate change] is a threat to the whole world”. Theresa May is set to raise the issue with him during his visit.
Investment trump card: Thankfully, while Mr Trump is America’ s leader, many of his countrymen aren’t following his lead. As Rathbone’s Julian Chillingworth pointed out recently: “Mr Trump champions coal, has little care for the environment beyond a golf course, and dismisses climate change as a myth cooked up by the Chinese. But a recent Yale poll shows three-quarters of Americans accept the reality of global warming and they are becoming increasingly concerned about humans’ effects on the planet.
“This chimes with what our Rathbone Global Sustainability manager, David Harrison, noticed when he visited the US earlier this year. Suddenly, American company managers were talking about sustainability and its growing importance among their customers. As David says: “If American companies – some of the most profit-focused businesses on Earth – can be swayed to become sustainable, anyone can.”
Finally, there’s the $1 billion Trump now has to spend building a wall to separate the US from Mexico.
Having made the money available by declaring a state of emergency, the infrastructure project is yet to start, but will no doubt begin before the presidential election campaign kicks off later this year.
Investment trump card: Devan Kaloo, who heads up the team behind the Aberdeen Latin American Equity fund said to us recently that while Mexicans don’t like the idea, they understand that it is an issue for the US domestic ‘audience’ and actually has little impact on the economy.
More important in this respect, was making sure their own trade deal was finalised – which has happened. The fund currently has around a quarter of the portfolio invested in Mexican companies*.
*Source: fund factsheets 30 April 2019