US Elections 2016- Implications and Impacts of Trump’s Triumph

Mr. Prashant Trivedi, Chairman of the Multi-Act group, discusses his views on the US 2016 election results.

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Join us in this Podcast to know:

1. Is today’s Trump win a headwind for markets?
2. Any particular impact on US economy due to this result?
3. Will the international trade be impacted?
4. Given the reaction in Indian market, what should we expect for India?
5. What will be the effect on currency markets?
6. Will Trump be able to raise interest rates in the US?
7. What’s the safe haven for an investor in such turbulent times?

Read the Transcript of this Podcast:

Today the world witnessed a historic event, where an unexpected turn in the US presidential race made Mr. Trump. On this occasion, we bring this special podcast, where Mr. Prashant Trivedi, Chairman of the Multi Act group, shares his views on this event.

1. Prashant, today, the US election results are out, and Mr. Trump is the new president of the United States. For a number of people, this came across as a shock, while others rejoiced. What is your reaction on today’s results?

Well, for quite some time I had been saying that the so called 99% are angry at the way things are going and one should expect the revolt of the 99%. While Trump didn’t quite exactly have the 99% of the votes, the fact is, there is a large majority of people who continue to feel hard done by the economic environment and the way in which the economic environment is stacked against them.

Clearly a vote for Mr. Trump is a registration of the disapproval of the way in which the elites are running economic policies and running the economic systems to better fit the few at the expense of many.

2. There were quite a few statements on the lines of “if Clinton wins, it will be a status quo. But if Trump wins, it will be seen as a headwind for the market”. Or someone else says: ‘Brexit was about UK instability. Trump is about global instability.’ 

Do you think today’s Trump win is a headwind for markets?

Well, clearly the market reaction – “the immediate market reaction” – has been very negative. But just as in the case of ‘Brexit’  where that negative reaction was sort of unwound over the next two three months , I am not sure how much of this reaction in the market is a correct response to Mr. Trump’s election.

I have always felt – rather we have felt – that market has been an accident waiting to happen in any case. Most of the market remains at elevated valuation levels. Those elevated valuation levels are largely as a result of mistaken beliefs by Investors that somehow, QE is going to ensure that asset markets remain high and continue to go higher.

I don’t believe that.

So the fact is, it is hard to say that if there is any market reaction, there is any durability to that market reaction as a result of Trump’s election per say. If there is any logic to it, the only logic is that Mr. Trump has criticized the policies of the Federal Reserve in having quantitative easing and I believe if he carries that out, then clearly the unwinding in the asset markets was warranted and it has nothing to do with Mr. Trump’s election per say other than the fact that these policies were unsustainable in the long run in any case.

3. What do you think will be the impact on US economy as a result of this presidency? Any specific sectors or industries that might be get adversely or beneficially affected because of Mr. Trump?

Well, I think it’s still too early to say because Mr. Trump had made lots of comments and it is hard to believe that he is going to carry out every single statement that he made! I think we will have to wait and see who are the kind of people that he appoints to his administration, how does he actually interact with the people that he appointed in his administration and as result of all that, one would be able to say that what is the likely impact on US economy either in the medium term or long term.

But I am not as apprehensive as a lot of mainstream media would have you believe about the impact of Trump presidency in the United States. I think the very thing there is a potential for the Trump presidency to be a positive in the long term for the United States, given that we have believed that a lot of the economic trajectory in the United States: for example debt – the buildup of debt, the buildup of entitlements – is clearly unsustainable in the long run.

4. How, do you think, will the international trade be impacted?

Well, again international trade has been actually surprisingly going down over the last nine months to twelve months. And it’s not very clear as yet what is been the reason for this decline. There is been a lot of talk about the globalism being unwound, but I am not sure that is necessarily an accurate indication. Again I think it’s too early to say whether international trade will continue to decline, simply a trend that had peaked and reversed even nine to twelve months earlier or whether international trade will accelerate the downward trajectory or reverse itself.

Again I think what is very clear to me is that the global partner trading has been distorted by quantitative easing programs and monetary policies being run in the developed world sort of ultra-loose and ultra-liberal monetary policy being run in the developed world and the emerging markets are constraints by the kinds of policies they can run.

People are saying that Mr. Trump’s election will cause a decline in international trade – well, international trade has been declining for the last twelve months. Mr. Trump has nothing to do with it and again it’s unclear to me that this is going to be a feature of a Trump presidency. We will have to wait and see who are the appointments in the administration, who are the type of people who come and how is he going to roll back some of the aspects – some of the negative aspects – of international trade that has been going on.

For example – while I am very much in favor of free trade – its quite clear that some countries are abusing that free trade rules – in the sense that they have an extremely loose and liberal credit expansion, which results in companies actually selling their goods at far below what it would really cost you to produce those goods. So it is quite clear to me that certain countries have abused the free trade regime and it’s not very clear to me that their continual abuse of these is positive for the world economy.

So I think some of these things actually addressed in an effective manner, it will probably be a net positive for the sustainability of what’s happening in the global economic environment.

5.  Are there any India specific views?

Well, I mean nothing other than the fact that obviously, the knee jerk reaction the market has been to sell the emerging markets and so obviously – to a certain extent – given the fact that India was a favorite destination amongst the emerging markets, the immediate reaction will be negative.

But again I doubt that the knee jerk reaction as a result of Mr. Trump’s presidency is the correct response. So again, I would say that, I don’t think anything has changed in the medium term or the long term as far as the Trump presidency is concerned. I think probably Trump would have better relationships with India than with our neighbor and so I would be surprised if India and US didn’t have better relation and net-net in the longer term it will be positive.

I think obviously Trump has been critical about the IT side of things, so that sector might be something where one would have to look at ‘what are the kind of policies that come in over the next 90 days or 100 days’ after Trumps inauguration sometime in January. But again I think the immediate knee jerk reaction is not necessarily sustainable in medium term and so there could be certain pockets where that knee jerks set off may present an opportunity to buy.

6. Do you think whether Trump will be able to raise interest rates in the US?

Well, remember that Trump has nothing to do with interest rates. Interest rates are set by Federal Reserve. The Federal Reserve chair and the board are not going to change as a result of Trump coming. So, really Trump is not going to have any sort of impact on interest rates. It’s the decision of the Federal chairperson and the rest of the board of governors.

I think if there are lots of turmoil in the market or anything, the Federal Reserve will hold off on the increasing  interest rates that they said they are going to increase and again while Trump makes any noise about interest rates or whatever – leaving aside the election rhetoricit’s not very clear that as a president he would actually do anything in terms of urging the Federal Reserve to increase the interest rates or whatever. That doesn’t seem likely. So I would be surprised if that happens.

7. Any views on the effect on currencies?

Again I think, you know the Peso went down very sharply, I think emerging currencies were affected a bit and again I think that some are part and parcel of this belief that Trump is bad for globalization and he would reverse some of the capital flow that will be going in. But I am not very convinced that, that’s a very rational response in the medium term.

I think – again – other than a knee jerk reaction about sending emerging market currencies lower, conversely dollar has gotten down against the other developed reserve currencies. And I think there really isn’t any rational logical reason I can come up with: as to why that should be the case.

I think again this is part and parcel of the financial intermediaries creating and spreading stories where none really exists.

8. Is there any safe haven for an investor in such turbulent times?

We have been saying this for last 2 to 3 years that all investors need to be at the highest quality spectrum of each of the asset classes.


a. the highest quality cash asset is Gold

b. the highest quality fixed income asset is net credit companies or bonds of sovereign government that net credit risks or government that runs responsible budgets and responsible spending to regime

c. and finally on the equity side we have continuously maintained that you need to buy the high quality businesses.

I think irrespective of whether Mr. Trump came in, Mrs. Clinton came in or whoever comes in, we believe that at some point in time the unintended consequences – negative consequences – of QE are going to come through in the markets on a sustained basis. When that happens, the only haven is going to be the highest quality asset, although highest quality instrument in each asset class and we would suggest that investors by making sure that they only expose to that in their portfolio will ride out any storm and will find that instrument is actually going to start being favored by all other investors.  So other investors will start gravitating towards that.

So we think that there’s going to be a huge relative out-performance between the high quality instrument in each asset class and the lower quality instruments in each of those asset classes.


About Multi-Act

Multi-Act was founded in 1997 by two Wharton graduates, to develop an Equity Research capability for their own investments. Today, we employ 50 people who operate out of our offices in Mumbai and Pune and service a range of clients from wealthy families, family business owners to sophisticated investors and capital intermediaries around the globe.

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