Each week, a professional investor tells us where he’d put his money. This week: Didier Saint-Georges, Carmignac Gestion
Donald Trump’s looming presidency stands as a symptom of a broader failure. Even after years of quantitative easing and rock-bottom interest rates, economic growth has been consistently disappointing almost everywhere for the past eight years. Trump’s victory also attests to the fact that since 2008 increasing numbers of voters have been rejecting the regime of neoliberal globalisation. In country after country, every election seems to offer the opportunity for a different economic agenda focused on more fiscal stimulus and, in some cases, less open borders. It’s therefore paramount for investors to keep their finger on the political pulse, while also recognising that, in the current climate, there is only so much that monetary policy can do.
In a telling sign of the shift under way from monetary to fiscal support, industrial and cyclical stocks have bounced back from the lows hit in January and February last year, outperforming other sectors. Though the anticipated fiscal stimulus will not materialise overnight, the more immediate prospect of a reduction in the US corporate-tax rate has stoked investor appetite for equities and conversely penalised the bond market. In light of this, the sectors we recommend include those linked with the probable rise in infrastructure spending – commodities and construction. We also suggest keeping an allocation in tech and healthcare, which are driven by strong secular trends that are likely to generate long-term performance regardless of the economic cycle. We are, however, mindful that some healthcare and tech stocks may already be on high valuations as a consequence of the pervading low-yield, low-growth environment.
A company that stands to benefit from the expected rise in US infrastructure investment is Cemex (NYSE: CX), one of the world’s largest cement producers. The company has substantial operations across North America and is well placed to take a share of any uptick in construction contracts, whether or not Donald Trump holds true to his campaign promise and builds that wall.
Ageing populations and rising healthcare spending provide strong fundamental trends for pharmaceutical firms. Celgene (Nasdaq: CELG) is a biotech with a strong growth record, with revenues nearly doubling to more than $9bn in the five years to 2015. It has a solid portfolio of certified medicines targeted mainly at cancer and inflammatory conditions, as well as attention deficit hyperactivity disorder (ADHD).
The technology sector has been buffeted by Trump’s protectionist rhetoric, causing the loss of some of 2016’s gains. But Facebook (Nasdaq: FB) remains a pre-eminent stock. In the technology business dominant players with strong legacy businesses tend to get rewarded as long as they stay nimble with new initiatives.