After a hectic (and sometimes slightly confusing) few months, we have a winner of the 2024 US Election.
Donald Trump will be the new president of the United States and have the honour, and incredible responsibility, of leading the country for four years from his inauguration on 20 January 2025.
What does this mean for markets?
First and foremost, markets hate uncertainty.
So, without wishing to take away from Trump’s victory, anyone winning was going to be a good thing. Now we can all settle down to the serious business of analysing his policies and their impact on markets.
There are good reasons to believe that the impact on the US stock market could be positive, and particularly so for smaller companies.
Why?
Because trade tariffs favour domestic businesses over international conglomerates, and smaller companies are usually more domestically focused.
Trump has talked a lot about tariffs. We expect the reality to be a little more muted than the campaign chat. But nonetheless at least some new tariffs are likely, particularly when it comes to Chinese trade.
Combine this with the knowledge that historically small companies have tended to perform well relative to their larger counterparts in a falling interest rate environment, and the outlook could be quite positive.
Looking a little further afield, Trump’s win could cause some jitters in global equity markets. We have yet to see how his foreign policy will play out, but it could cause tension with certain countries, including China, and tariffs could impact growth in markets which rely on exporting goods to the US.
Markets aren’t keen on geopolitical uncertainty, and if tensions escalate, either with China or more generally (for example in the Middle East), we could see increased volatility.
So, how could you invest for a new president?
The reality is likely to be somewhat less dramatic than the campaign rallies, and there are still many unknowns around how Trump’s policies will play out in practice.
Good active managers can be worth their weight in gold in times like this. That’s because they’ll be able to analyse and respond to any policy surprises quickly and adjust their portfolios to manage the risks and take advantage of the opportunities.
Here are 3 fund ideas to get you started.
This isn’t personal advice. All investments can rise and fall in value, so you could get back less than you invest. If you’re not sure an investment is right for you, ask for financial advice.
3 US fund ideas
Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
For more details on each fund and its risks, use the links to their factsheets and key investor information.
Artemis US Smaller Companies
Trump’s policies could likely be positive for domestic-facing US corporates, and that means US smaller companies could benefit.
Managed by the experienced Cormac Weldon since its launch in 2014, the Artemis US Smaller Companies fund seeks out smaller companies with potential for their share price to grow and could be a good option.
We like the way the manager considers how the US economy is performing to actively identify sectors and companies that are benefiting from trends, as well as areas that are finding things tough.
We believe this could stand the fund in good stead to take advantage of new or changing policies put in place by the new president.
The fund aims to deliver long-term growth by investing in smaller companies based in the US. Smaller businesses are often among the most innovative and offer lots of growth potential, but they're higher risk than their larger counterparts.
The fund usually consists of 40-60 companies. Holding a smaller number of investments can increase risk, as each has a larger impact on performance.
30/09/2019 To 30/09/2020 | 30/09/2020 To 30/09/2021 | 30/09/2021 To 30/09/2022 | 30/09/2022 To 30/09/2023 | 30/09/2023 To 30/09/2024 | |
|---|---|---|---|---|---|
Artemis US Smaller Companies I Acc GBP | 9.77 | 36.70 | -15.72 | -3.29 | 22.14 |
IA North American Smaller Companies TR | 4.46 | 35.86 | -10.31 | 0.55 | 13.25 |
Rathbone Global Opportunities
If you’re unsure of what a new president could mean for global markets, you could consider an active fund so that the manager can worry about the risks for you.
The Rathbone Global Opportunities fund could be a good option to add some global diversification to your portfolio, while getting the benefit of it being actively managed.
James Thomson, the fund’s manager, is one of only a few global fund managers to show they can pick great companies and perform better than the broad global stock market over the long term.
He looks for easy-to-understand businesses that can grow to dominate their industry and defend themselves from competition.
He'll also search off the beaten track to find companies with superb potential that might be overlooked by other investors.
Thomson thinks exceptional companies are few and far between, so he only invests in a small selection. This gives each the potential to contribute significantly to performance. But it does increase risk, as does the flexibility to invest in smaller companies and emerging markets.
At the moment, he mainly invests in developed markets, like the US, UK and Europe.
30/09/2019 To 30/09/2020 | 30/09/2020 To 30/09/2021 | 30/09/2021 To 30/09/2022 | 30/09/2022 To 30/09/2023 | 30/09/2023 To 30/09/2024 | |
|---|---|---|---|---|---|
Rathbone Global Opportunities S Acc | 27.75 | 19.94 | -18.11 | 11.53 | 22.05 |
IA Global TR | 6.99 | 23.32 | -8.79 | 7.42 | 16.25 |
Troy Trojan
If you’re worried about the impact of tariffs or political instability on the geopolitical situation, a more defensive fund could be a good option to help offer some shelter in turbulent times.
The Troy Trojan fund, managed by Sebastian Lyon and Charlotte Yonge, aims to grow investors' money steadily over the long run, while limiting losses when markets fall.
The fund is focused around four 'pillars'.
The first contains large, established companies Lyon and Yonge think can grow sustainably over the long run, and endure tough economic conditions.
The second pillar is made from bonds, including US index-linked bonds, which could shelter investors if inflation rises. Some of the fund is also invested in UK government bonds (gilts).
The third pillar consists of gold-related investments, including physical gold, which has often acted as a ‘safe haven’ during times of uncertainty.
The final pillar is ‘cash’. This provides important shelter when markets stumble, but also a chance to invest in other assets quickly when opportunities arise.
The manager has the flexibility to invest in smaller companies, which, if used, adds risk. The fund is also concentrated which means each investment can contribute significantly to overall returns, but it can increase risk.
30/09/2019 To 30/09/2020 | 30/09/2020 To 30/09/2021 | 30/09/2021 To 30/09/2022 | 30/09/2022 To 30/09/2023 | 30/09/2023 To 30/09/2024 | |
|---|---|---|---|---|---|
Trojan X Accumulation | 7.53 | 9.29 | -0.83 | 0.44 | 7.89 |
UK Retail Price Index | 1.13 | 4.86 | 12.64 | 8.86 | 2.70 |
FTSE All-Share TR | -16.59 | 27.89 | -4.00 | 13.84 | 13.40 |