When Expert Investor last visited Stockholm in September 2016, the majority of local fund selectors were convinced that a Donald Trump victory in the US presidential elections would spell doom.
But the Swedes have now drastically changed their initial assessment: a few weeks into Trump’s presidency, 61% of Sweden’s fund buyers characterise themselves as bullish. Even though three quarters of them are convinced Trump will erect tariff walls, they believe this will only affect emerging markets.
Like their peers in the rest of Europe, the Swedes believe emerging market assets and US treasuries will be most at risk from president Trump’s presumed policies. US equities are expected to benefit most.
Swedish investors are confident economic growth in Europe will pick up this year, driving Eurozone inflation up. They also have a strong preference for small caps, indicating increased risk appetite.
Italian job
But the fund managers speaking at Expert Investor Sweden last week tried to provide some counterweight against the optimism exhibited by his Swedish audience.
“There is a more than 50% chance something goes wrong in the Eurozone in the three years. There is a meaningfully high probability something can go wrong this year, but it surely can’t go right for another 10 years,” argued an American fund manager, who requested anonymity…
Saying he had been shorting Italian government bonds since 2006, he added: “There’s no way Italian debt will add up over the medium term. This means that even if the Eurozone sticks together, Italy will have to restructure its debt. In such a scenario, long Bunds and short Italian debt is the best trade you can have.”
Other speakers at the forum agreed uncertainty is riding high, but not just in Europe.
“I think we are staring down the abyss of some big changes,” said Justin Wells, investment director for global equities at Old Mutual Global Investors. “We are having to deal with Trump and a possible restructuring of the US-European relationship. One cannot discount further policy changes there.”
Investors would therefore do well to stay guarded, added Wells: “At the end of last year we saw huge euphoria after the panic before the elections, with very little tangible justification for these big [upward] moves.”
Here you can see a full overview of delegate voting results from Expert Investor Sweden.
And here is a slideshow of photos taken at the event.
