I was actually reading some articles as to what really influences voters in the US and I believe the economy plays a very big part and clearly a Trump win seems to be a great thing for the economy as we have seen in the past. So, how do you believe this win is likely to play out more importantly for the global economy as well as our own?
Matt Orton: It is certainly a positive signal. It is a positive signal most particularly for the US economy and it is a positive for selected parts of the global economy because like you were talking about earlier, tariffs are going to have different impacts across the world and it is too early to know exactly what those tariffs are going to look like, how they are going to manifest themselves, whether they are used more as a negotiating tactic or is a very kind of hard stick against certain belligerent powers around the world. But I think what is most notable for the US economy and why we had so much enthusiasm in the market today and particularly when you look at more cyclical sectors like financials, it is not only the enthusiasm around growth, but it is that growth can be fuelled because of deregulation. The regulatory environment for the past four years has not been incredibly favourable for mergers and acquisitions, it has not been favourable for consolidation of certain industries and so I think that is a big part of what was playing out today. And when you have a strong reaction post-elections, that tends to play out over the next two weeks, over the next month, we are heading into a very favourable seasonal period for the overall economy. So, I am very optimistic about where the markets go. I am more optimistic about the prospects that the growth we have been seeing can be maintained.
But when I look at the world, I think selectivity definitely has to be required and there are certain countries that are certainly going to benefit more than others and within the emerging market complex in particular some of the friendlier nations to the US friendshoring can happen where I think Trump feels confident in the regimes there, call it India, Vietnam, Taiwan, South Korea. Those are countries that I would be looking at in particular from a global perspective.
When Donald Trump got elected in 2016, markets went down. They were worried. 2024, markets are going higher. Why different reaction to the same person?
Matt Orton: Yes, it is a good question and the initial knee-jerk reaction in the US was down, followed by a very strong rally through the end of the year in 2016, as investors got confidence with respect to what Trump really meant.
Because in 2016, it was really an unknown variable. I do not think anyone was expecting Trump to win. So, there was a much higher element of uncertainty then and that is why you saw that initial pullback. Whereas today in the market, we have a very clear vision of what Trump 2.0 will mean for the U.S. economy and for the markets as a whole.
And because of the strength with which he was elected, winning the popular vote, the Senate moving Republican, the House most likely moving Republican, I think that sends a very strong signal that the policies on which the Republican platform ran are going to be enacted and put into legislation and a big part of that is pro-growth, lower taxes, deregulation, and really trying to make sure that the economy is able to continue growing, so that accounts for the difference in the overall reaction. But overall, the market was positive in both cases. It just took longer in 16 for that to play out.
Just wondering as to what the reaction or rather what a Trump victory would really mean for various asset classes because from what I see it is actually Bitcoin wherein you are seeing a massive risk on.
Matt Orton: Yes, and Bitcoin was front and centre with respect to the Trump campaign because he ran first on the platform of we are going to deregulate, we are going to allow Bitcoin, we are going to create a reserve of Bitcoin in the US, so there is a lot of very positive read-throughs you can get with respect to Bitcoin. Sectors like financials, like I talked about earlier, stand to benefit and regional banks in particular in the US continue to look very attractive on the idea that there will be more consolidation going forward.
I also think when you look down the market cap spectrum, smaller cap companies, assuming rates do not continue to move higher to a significant degree, I think the rally down market cap in the US can be sustained because valuations relative to large are still near historic lows. You have got earnings growth that is starting to turn around and you have this idea of deregulation, M&A coming back to the market, which stands to benefit smaller companies the most.
So, there is a lot of parts of the US market that I do think stand to benefit. And even some of the sectors that were weaker on a relative basis today, call it utilities, real estate, your more interest rate sensitive sectors, there is again a lot of selective opportunities there with respect to longer term secular growth themes, artificial intelligence, power grid build out. So, again, the markets are little bit overestimating the inflationary impact of Trump policies.
So, I do not think we are going to see rates really back up too much further before the end of the year and that provides scope for some of those sectors to also get a bid once we fully digest all of the news and kind of what the first 100 days might ultimately look like.