Rathbones: Investors Should Not Worry About Trump

Trump may threaten to make the US Presidential campaign into a farce, but should he come to power his global influence would be limited, says Rathbones

Emma Wall 22 August, 2016 | 1:15PM
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Emma Wall: Hello, and welcome to the Morningstar series, "Market Reaction." I'm Emma Wall and I'm joined today by Julian Chillingworth, Chief Investment Officer of Rathbones.

Hi, Julian.

Julian Chillingworth: Good morning.

Wall: So, with Brexit, Trump and Marine Le Pen there seems to an anti-globalisation movement sweeping across the developed world, but you're saying there are reasons perhaps not to panic.

Chillingworth: Indeed. I mean, we can't ignore the politics obviously, but I think when you drill down and you look at what's going on, the change in people's attitude isn't abandoning globalization, no. Obviously, the internet is one of the great globalizers of all time.

But what it is about is, people are perhaps concerned about jobs and also concerned about their own wellbeing and some people who have missed on the great World Wide Web internationalisation, et cetera. So, China still bottoming out, looks okay. U.S. economy is fine and in Europe, more patchy. Japan undergoing further monetary stimulus. So, there's reasons to be cheerful.

Wall: Drilling down then into the U.S., obviously, Trump is a big threat, a joke a couple of years ago, but now looking like there is a possibility he may become President. How worried should we be from both the global economy point of view and indeed financial markets?

Chillingworth: Yes. I mean, I'm sure leading up to the U.S. election in the autumn there's going to be a lot of noise around whether Donald Trump is elected as President and I'm sure that a number of people in financial markets will worry.

But you should bear in mind that the President of the United States probably has a lot less power than say the Prime Minister of the U.K. to execute particularly major decisions without the support of the Congress or Senate and so consequently, I think although we should be concerned and I'm sure that there will be jittery days ahead if he were to be elected, I think that what he could achieve on his own would not be as damaging as some people think.

Wall: And what then about how this all affects investors because we are going to continue to see this globalisation, the World Wide Web, as you say, continues to be a dominant part of all of our lives. Is it then about looking for companies that have these globally diversified revenues or more about domestic stocks?

Chillingworth: It's obviously in any portfolio, there's got to be a mix of both and you need a well-diversified portfolio. But I think companies that continue to be able to boost their revenues to get that bottom-line growth coming through are more likely than not to be those companies with a wider brief.

So, global companies offering something that the world actually needs that maybe consumer goods, it maybe financial services, it may be interesting developments in electronics or industrial area as well. So, what you need to concentrate on is good quality, solid business models from companies that are delivering solid cash flow and be able to not only reinvest in their own business but pay out dividends as well.

Wall: Julian, thank you very much.

Chillingworth: Thank you, Emma.

Wall: This is Emma Wall for Morningstar. Thank you for watching.

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Emma Wall  is former Senior International Editor for Morningstar