Neuberger Berman head of alternative global head of alternatives, Anthony Tutrone, said the removal of artificially low interests could mean stock performance is once again reflective of company fundamentals, benefitting those who actively manage their portfolio.
“I believe the re-emergence of corporate fundamentals will be a key driver of stock prices and thus an opportunity for active managers to generate alpha, on both the long and short side. With more normalised monetary and interest rate policy likely for the US, many overly leveraged, lower-earning, lower-quality companies will be viewed more critically relative to their higher-quality peers,” Mr Tutrone said.
“This, in turn, will likely be reflected in increasing valuation dispersion among companies, which could support the efforts of active managers.”
However, just as Trump’s election wiped $34 billion initially off the ASX before recovering $58 billion the following day, his presidency could also be marked by volatility.
“This also means that primary responsibility for economic policy-making will shift from highly transparent and methodical central banks to legislators and governments that tend to be neither of those things,” Mr Tutrone said.
“Given the euphoria with which risk markets reacted to Trump’s election and anticipated policy actions, there’s a good chance that they may be disappointed should reality fall short of their expectations.”