A Trump palate cleanser

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A Trump palate cleanser.

It's the festive season and I've been thinking rather more about food and drink lately than usual (although to be fair, they are amongst my favourite topics!). I thought these words in a Christmas recipe book were an apt introduction to our final newsletter of the year:

Without a palate cleanser, strong flavours overwhelm the palate, making it difficult to experience delicate flavours in the next course. Palate cleansers consumed between courses neutralise the palate, cleansing any lingering flavours.

I don't know about you, but I am seriously in need of a Trump palate cleanser! The strong Trump flavours have certainly overwhelmed all others in the past month, and arguably the past year. For investors, 2016 will be remembered as the year Donald Trump was elected President and changed the world as we knew it. How he changed it will only become clear in time … there is certainly no clarity right now, even though markets are behaving as if there is.

We can only guess what might happen in the American economy, and in global markets in two years' time, just as we can only guess who the real Donald Trump is and what he really intends to do.

Markets are forward looking and are supposed to discount future outcomes in today's prices. But how does a market factor in absolute uncertainty? To date, markets have focused on the almost-certain outcomes like: there will be more infrastructure spending (there's at least one big wall that needs to be built), there will be more growth (Trump has promised more jobs will be created and filled), and there will be higher interest rates (because there will be growth and inflation, and Trump doesn't support the Fed's strategy in using interest rates to drive the economy).

This has been the immediate and obvious trend, and it has seen a reversal of some of the most powerful trends of the last few years — high-yielding investments are no longer as popular, US money is being repatriated from international assets, and growth assets are now being favoured over defensive assets.

But like I said at the beginning, this is the festive season so the important thing is to wish you all a very happy, enjoyable and safe Christmas wherever you may be. We have loved talking to you in 2016 and hope to have many more conversations with you in 2017. Best wishes and a Happy New Year.

A personnel update

We farewelled Murray Brown last month and hinted at his successor. We are now pleased to reveal that our new Portfolio Manager for New Zealand Equities is Sam Dickie, who is returning with his wife and family from Hong Kong in the first part of next year. Sam has worked as an investment analyst and portfolio manager since 1998 in New Zealand, Australia, London and Hong Kong. He has covered a variety of sectors including property, telecommunications, tourism, and industrials and had a particular focus on China and India. He began his career at Credit Suisse/First NZ Capital as an analyst, and was trained by our very own Murray Brown! We look forward to Sam’s return to New Zealand, and are enjoying bringing him up to speed with our portfolios so that he can hit the ground running.


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