America votes: Markets pricing a Trump win

As the United States gears up for the presidential election, global markets are closely watching the outcomes and implications for various asset classes. Dan Scott, Chief Investment Officer and Head of Multi Asset at Vontobel Asset Management, provided key insights into how markets have been reacting and pricing in the potential outcomes of the election. Scott highlighted that while the markets have been treading water in anticipation of the election results, they had already priced in a Trump victory with high conviction. However, with recent uncertainty emerging, there has been a slight shift in market sentiment with some profit-taking seen in the 'Trump trade' and weakness in the dollar. Scott emphasized the importance of looking beyond the presidential election to the congressional elections, noting that the control of both houses could have a significant impact on global markets. Regardless of whether it's a Trump or Harris presidency, the focus on China containment and reshoring of supply chains is expected to continue. Scott also highlighted the fiscal expansionary policies of both candidates, which could lead to long-term dollar devaluation. Discussing the US debt problem, Scott pointed out the strain on lower income segments and corporates due to high levels of debt. With the Fed likely to continue cutting rates to alleviate financial pressure, Scott emphasized the need for a balanced approach to address the debt issue. Additionally, Scott highlighted the bullish stance on gold, citing it as an inflation hedge, a geopolitical risk hedge, and a strategic asset for central banks looking to diversify away from the dollar. Turning to South Africa and the opportunities in the region, Scott expressed optimism about the improving consumer sentiment and potential outlook upgrade by rating agencies. While acknowledging the challenges facing South Africa, Scott indicated that Vontobel Asset Management sees potential in the region and manages client assets there. In conclusion, with the US election outcome uncertain, global markets are bracing for potential shifts in policies and market dynamics. The strategic positioning of assets such as gold and considerations around emerging markets like South Africa are crucial factors for investors navigating the evolving market landscape in the post-election scenario.