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Fade irrational Trump exuberance
Weekly investor research
14 November 2016
The material moves in EM asset prices and currencies following the Trump election victory are a market over-reaction and misdirected at EM. Markets are likely to take some time to form a consensus about America’s path under a Donald Trump presidency. We think the EM sell-off will soon abate and buyers will return, attracted by the fortune of sudden cheapness. We also see no fundamental reasons to be worried about EM at this juncture. EM investors should therefore exploit the opportunity created by irrational Trump exuberance to buy. Having said that, there is no room for the complacency for developed market investors. If Trump follows through on his election promises we see good reasons to believe that the 35-year rally in developed market fixed income is over.