Investors may not like the opinions of US president Donald Trump, or how he goes about his politics, butt Rathbones multi-asset manager David Coombs is aligning his portfolio to fit with the controversial statesman’s policies.
“We are relatively pro-Trump,” he said, before caveating “not from a political sense – just to be very clear”.
The manager of the Rathbones multi-asset range, including the £3.4bn Rathbone Strategic Growth Portfolio, has tried to shift his strategy towards what the US president is trying to achieve, noting that “being aligned to his interests is the less risky thing to do”.
He broke down Trump’s plans into four sections. To start, the president wants to lower interest rates, including controversial decisions such as trying to fire a member of the Federal Reserve and constantly criticising chair Jerome Powell.
“We can argue about how he achieves that, but he wants that,” said Coombs.
Next, Trump wants the S&P 500 to perform well, as much of his voter base will be heavily exposed to the US market through their 401K pension plans.
Third, he wants a weaker dollar, while lastly he aims to “attack long-term historic trade imbalances and unfair trading that the WTO [World Trade Organisation] has allowed to go on for years, which is what his tariffs are all about”.
These, said Coombs, will either bring the US direct income from higher payments or “bring advantages to GDP” by bringing manufacturing into the US or restricting external products being sold in the country.
“I am not saying whether I agree with any of those things or not, what I am saying is that is what he wants. To me, it seems quite sensible to have a portfolio that is not too at odds with those things. It is probably going to bring a lot less pain,” said Coombs.
“From our point of view, everything he is doing is kind of logical. Not maybe the execution, but if you underpin all this stuff, there is a logical cohesive strategy in our view, which admittedly gets lost quite easily.”
An example of this is Europe, where investors became very optimistic earlier in the year, with the phrase ‘Make Europe Great Again’ popularised as Trump’s policies turned investors off the US and towards other international markets.
Some have dubbed this the “end of US exceptionalism”, a phrase that Coombs takes umbrage with. He highlighted non-reciprocated tariffs and tax competition in Ireland attracting US corporates as two things the president has tried to address, particularly the latter, as “they don’t like that in America because they’re avoiding tax”.
“That is all bad for Europe. This is not good for European economies. Markets are starting to react to that because you are seeing European bond yields start to rise quite rapidly and some of the euphoria over European stocks [end],” said Coombs.
One area that received a lot of attention in Europe was defence stocks, which surged as the war in Ukraine continued. Further pressure was heaped on European countries by the US president, who has been encouraging others to up their defence spending.
Coombs has owned select defence companies “for quite a while” as anticipated additional NATO spending and Trump’s unwillingness to prop up the Western military.
“It was fairly obvious to us that [Trump] was going to put huge pressure on NATO again. There was much more chance of European countries giving into Trump on defence spending,” he said.
“That goes back to politics – you have to understand what Trump wants. He wanted European countries to take more of the financial burden rather than the US bailing them out. There is a logic to that. This is not blue-sky thinking. It’s following the trail of Trump’s key objectives. You might not like what he does, but he’s doing what he said he would, so why are we so surprised?”
Part of the reason investors are put off by the president’s intentions are due to the way he deals with the media and his rhetoric around divisive topics.
But much of this should have been learned from the first Trump administration, when Coombs “did a lot of analysis on him pre-2016” in an attempt to try to “get under the skin of the character” and “understand what drives his decision-making beyond the noise, because there is lot of that”.
“People kind of lose their mind a little bit with Trump and he kind of enjoys that. He plays the media quite well I think. He knows exactly what he is doing. He is not some thicko,” he added.
“He’s very manipulative of the media – particularly certain parts where he knows what buttons to press. He appears to really enjoy it, so you have to factor all that stuff out.”