The US stockmarket began to reconsider its enthusiasm for Donald Trump this
week. But stock investors needn’t give up on the idea of the “Trump bump” altogether, says Anthony Hilton in the Evening Standard. They just need to switch their focus. “Russia could prove to be more effective than Wall Street as a way to bet on Trump.”
Neptune Investment Management’s Robin Geffen, an expert on Russia, points out that sanctions are now likely to be lifted, which bodes well for the economy and earnings. President Vladimir Putin, meanwhile, however distasteful his policies, provides a more stable and predictable political backdrop than investors would find in many other developing countries.
The gradually improving macroeconomic backdrop is another reason for optimism. In 2015, Russia fell into a recession, with the economy shrinking at an annual rate of 4%. The oil-dependent economy was knocked for six by the collapsing oil price, but now the business cycle is turning, helped by a rebound in oil prices and an unexpectedly quick fall in inflation.
The deal with the oil cartel Opec to cut output has boosted not only the oil price but the rouble too, and the stronger currency has kept a lid on increases in the cost of living. As a result, there should be plenty of scope for interest-rate cuts in 2017. The consensus GDP growth forecast for Russia this year is 1.2%.
Russia is also the cheapest major stockmarket in the world: it has a cyclically adjusted price/earnings ratio (Cape) of just six. So while it will always be extremely risky, Russia currently looks like it might be worth a punt. One way in is via the JP Morgan Russian Securities (LSE:JRS) investment trust.