Financial markets will struggle to adjust to what was a very possible, however largely unexpected and definitely undesired result. Between today and his inauguration on the 20th January, they will pay rapt attention to every utterance of President elect Trump.

Already, we see a gulf between the rhetoric of the campaign and his acceptance speech which, for the large part, hit the usual magnanimous marks. This though was written by others and it was all too obvious where he extemporised: “it will be a beautiful thing”.

It is not difficult to locate why this has happened in political historical terms. America is about to become a minority white country and many resent this. Nor were all ready for the Obama presidency. Real wages for all but the top echelons have stagnated since the early ‘80s, fostering disappointment over a generation. A large majority of the country is pessimistic about the prospects for their children and 69% of the population is either “angry” or “disappointed” with their politicians and political processes.

In broad portfolio terms, looking beyond the snap reactions, the key question is whether this introduces a change of direction for the world economy and its financial asset classes.

From a top down basis, we have been fairly pessimistic on global economic growth and the central plank of Trumpism is to introduce trade friction and tariff threats. This would tend to slow down trade activity.

That said, the initial impetus in America is clearly reflationary and longer bond yields are moving smartly upwards in recognition of this. That move accelerates the baton change between long duration ‘growth’ equity assets including high PE consumer stocks and technology to other sectors, favouring cyclicals, materials, construction, infrastructure and banks.

Within clients portfolios we added a position in European banks some time ago and have created a basket of global infrastructure stocks which stand to benefit.

Outside equity, gold offers protection against extreme events, extremism and sudden changes in inflation now stands at 9% within the portfolio. Inflation linked bonds play well into a reflationary environment and stand at 29% within the portfolio.

Trumpism calls for a building programme in America with the renewal of key infrastructure. As described in a recent Investment Letter, we expect the US, UK and Japan to be at the vanguard of this version of fiscal boost and other economies to emulate these plans.

Investment Letter dated 3rd November

Such plans can go a long way as long as the cost of capital remains low. That remains in the gift of Central Banks as long as bond markets remain in their sway and whilst they are prepared to let inflation ride well above short term interest rates.