What are the emerging market themes for 2017? Cannings Purple’s Investor Insight team explain.
Following the recent US Presidential election win by Donald Trump, Goldman Sachs has put out a market note setting out what it sees as the emerging themes for 2017.
Notsurprisingly, many of the themes are influenced by the pending Presidential transition and what Trump’s election policies mean for the world.
Overall, Goldman Sachs sees more positives than negatives in the implementation of Trump policies, with a general feeling that the stimulus programs, like an increased military budget and higher infrastructure spending, are more likely to prevail than the potential for trade wars.
While it appears that the TPP won’t get up and the NAFTA Agreement may be looked at again, they fail to see wholesale changes due to the potential for significant countermeasures.
Goldman’s also notes that many of the macro economic changes that are expected over the coming year were already in place or underway prior to Trump’s ascendancy. Japan’s move to control the yield curve and a focus on short term credit costs may help avoid some negative side effects associated with quantitative easing.
They also note that an expected recovery in the oil price and a continuation of revenue improvement for US companies will continue, albeit at a gentler rate than previous.
For Australia, higher growth rates in the US should also be good for Australian companies and the economy. Higher confidence in spending may result in inflation moving up from its current low levels, although a reticence to ‘go hard’ may be enough to stop inflation getting out of control and interest rates raising dramatically to compensate.
As the world starts to fully comprehend what a Trump Presidency may look like, it is fair to say that many are now shifting their doomsday views down a dial. While nobody really knows how he will go in office, it is clear that he has a lot of people depending on him to do the right thing.
