Trump’s “volatility” won’t hurt Jersey’s fortunes

Monday 08 May 2017

It would take a declaration of war or major economic recession in the US for Jersey’s finances to take a hit, a leading US market strategist has said.

The US presidency recently hit headlines when a report into funding Jersey’s £466 million future hospital concluded that unexpected economic shocks – including US political instability and Brexit – could upset the Jersey government’s ability to repay a bond issued to pay for it.

But speaking to Express following a seminar on President Trump’s first 100 days, Tony Dwyer, Chief US Market Strategist for Canaccord Genuity Wealth Management, said that there was little chance of that, and that Jersey should have nothing to fear – unless Trump tried to renegotiate all his European relationships or tried to start a war. “Then all bets are off.” 

“On a normalised economic backdrop, even given the political volatility of the Trump administration, I find it highly unlikely that Jersey, which is such a beautiful place, will be affected. I would be much more concerned by what the impacts of Brexit are for the next two years than what the impact of Donald Trump is going to be, because it’s important to remember, politics make great headlines, they make for poor economic assumptions.”

Pictured: Mr Dwyer introduces his '100 days of President Trump' seminar, an on-the-ground perspective of how markets reacted to Trump’s election victory.

Adding that fears about Trump are “wildly overstated”, Mr Dwyer explained that the new president was actually presiding over one of the most economically stable scenes for a long time – not necessarily thanks to his own prowess, but because underneath the US economy, the world was doing well.

“Historically, [the first 100 days are] a kind of a guidepost as to what’s supposed to happen, but it’s interesting because he got very little of what he wanted to accomplish in the first 100 days, but he had the third best market performance for a president in their first 100 days.

“Most industries are driven by the economy and consumption, so if the economy and consumption are pretty good, there’s very little that the president can do that can destroy them,” he said.

“The US is still almost 25% of global growth – global GDP – so you really have to have a positive US [for the world to succeed]. But for the US to really have to do well, the rest of the world has to be growing. The good news is so many of the central banks have cut interest and made loans so much cheaper. Now more people have got them, more money is now flowing around the system globally and that has led to a pick-up in economic activity for every region of the globe.”

While he might be enjoying a good moment for business now, some are arguing that there’s no smoke without fire, as his tweets periodically collide with drops and shocks to markets from Nordstrom to pharmaceuticals. But despite this, even the industries that were supposed to fall under ‘The Donald’ – artificial intelligence, health tech, FAANG (Facebook, Amazon, Apple, Netflix, Google) – are prospering despite an initial drop following the election result, Mr Dwyer said. 

In fact, he argued, we’d likely to be seeing worse results under Democrat Hillary Clinton. “She stated she was going to be less business friendly, she was going to be more taxes on the upper income, and more regulation on the banks. The provider for so much of the capital that goes into investment is done by the banks. If you make it more difficult for them to lend money, you slow down growth. And that’s why the US has been in such a slow recovery over the last eight years.”

Although Trump’s volatility is well-documented on Twitter, and has raised fears over whether such online eruptions will transfer to the negotiating table, Mr Dwyer is confident in his abilities to shelter the US economy thanks to the team around him. 

Pictured: Strategist Dwyer sets out exactly what Trump has (and hasn't) achieved in his first 100 days.

“The good news is, while he seems to have volatility in his decision-making, the group he has around him is pretty stable. The Treasury Secretary really is getting his arms around regulatory environment and other issues in the Treasury, Tillerson’s doing a great job with Secretary of State… There’s an awful lot of experience and wisdom in their various areas that they’re supposed to control and I think that should insulate people and investors from fearing what one man can do when there’s so many other good men and women around him.”

He’s also being given a boost by the rise in consumer confidence across all age groups. Even the Milennials who turned their back on the Republican candidate during elections and protested his victory haven’t clutched their purses any tighter since Trump’s election, Mr Dwyer explains.

“The millennial demographic and younger population is more confident than at any time during the Obama administration. It makes great newspaper and online commentary, but people just want to know if they can afford their living situation and food.” 

That’s why Mr Dwyer argues that investors should make their decisions with that age group in mind – investing in home construction companies, for example – as they’ll be turning 27 this year, and getting ready to settle down for the long run.

At the moment, Trump might be preserving a “difficult status quo”, but so long as his policies aren’t actively worse for business – and they’re not set to be, given his background, Dwyer explained – we shouldn’t see a recession until at least 2020.

As for what wealth management professionals should do now? Make the most of the moment. “The first decision is, are you comfortable taking the currency risk when investing in the US? Given the depreciation in the pound against the dollar, I would be pretty comfortable with that. I would bet that the pound can actually strengthen against the dollar from here.

“Your secondary is, how close are you to a recession in the US? That’s the only reason you’d never want to invest there. We’re at least two years from a recession, so when you couple a stable-to-better pound with still growth in the US and globally, it seems like a pretty good bet.”