Vote in favor of the brexit, election of Donald Trump: populism is making a steady rise in strength in the world. Savers can adapt to them by deploying both offensive and defensive strategies.
Numerous factors explain this wave of populism, such as uncontrolled migratory flows and rising income inequality. The liberalization of international trade and competition from China are also accused by the Donald Trumps of this world. Moreover, the main consequence of the rise of populism is the resurgence of protectionism.
Msnbc breaking news has experts stating that the election of Trump will see a lot of changes in the business world.
In the US, three sectors are expected to attract investors' attention: Infrastructure; Banks and insurers (due to the anticipated increase in interest rates); and healthcare. "The Trump administration's desire to increase infrastructure investment should be beneficial in the short to medium term for engineering companies like WSP," he said.
The promised tax reduction should restore purchasing power to households and room for maneuver for businesses, assuming that the money given to the most favored households will be expended on runoff theory, reviving the activity and giving work to the popular classes. Except that this theory is very contested and that less tax is also less money in the coffers of the State: such a reform is thus likely to dig a little deeper into an already abyssal public deficit, warned the Tax Policy Center.
Which states have the most to lose with the Trump election? The most disturbed is Mexico, which has become the main subcontractor of the United States and could suffer from rising tariff barriers. Not to forget that its currency depends greatly on the dollar and fell to historic low recently? Finally, Mexico has many nationals illegally entering the United States who could be deported.
Two other States are also concerned. First is Iran, which awaits the lifting of economic sanctions in exchange for the agreement reached on the nuclear weapon: Donald Trump wants to call into question this agreement.
Finally, Japan is also in a state of uncertainty: the future president has increased criticism against them whereas the two states are very economically linked. In addition, the period of worry that is beginning is causing a rush on the safe haven values to which the yen belongs. Problem: the Japanese currency is already overvalued and handicaps exports, but then it is at the heart of the Japanese economic model.
Such a scenario must, however, be qualified in more than one way. First, a candidate rarely implements all his promises, especially when they are unclear. Then, because Donald Trump will have to deal with the presidential administration, which will surely push him to make less radical and clever decisions, but also with the US Congress, resolutely opposed to any isolationist policy.
Bet on infrastructure
However, investors can benefit from this by increasing or reducing exposure to certain sectors.
In addition, the populist parties all focus on the national economy. This strategy translates into an increase in infrastructure spending. Donald Trump's economic program is a good example.
That's why Serge Pepin, European Equities specialist at BMO Global Asset Management, believes that investing in infrastructure-related businesses can be a good offensive strategy.