Schroders on Trump’s impact on value stock picking

In a recent interview on CNBC Africa, Schroders' investment director for global value equities Andrew Williams shared valuable insights on the impact of President Donald Trump's policies on value stock picking. Williams highlighted the potential global supply chain reordering triggered by Trump's executive orders and the implications for value investors. He emphasized the importance of discerning regions and companies for investments in a market marked by exuberance and uncertainty. Williams also discussed the shift in earnings momentum from the US to Europe and Asia, urging investors to focus on company valuations and fundamental analysis. Williams delved into the sectors offering opportunities for value investors, emphasizing the importance of using bad news to make astute investments. He mentioned the cyclical space as a previous target for value investors and highlighted the current opportunities in the auto sector and China. With the cheapest quintile of the market trading below historical averages, Williams noted the abundance of opportunities for value investors to build diversified portfolios with unloved quality stocks and high-yielding companies. When discussing the risks posed by market trends such as the AI hype train, Williams cautioned investors to focus on fundamentals and avoid overexposure to volatile sectors. He emphasized the historical pattern of market concentration leading to eventual market corrections and advised investors to stay away from overvalued assets. Williams stressed the importance of taking a long-term view in assessing market valuations and the potential risks associated with high valuations. As the conversation turned to predicting market corrections and identifying signs of a potential market downturn, Williams acknowledged the challenges of short-term predictions but underscored the value of a longer-term investment philosophy. While valuations may not predict short-term market movements, Williams suggested that over a five to ten-year horizon, high valuations could signal risks for investors. Overall, Williams provided valuable insights into the dynamics of value stock picking in a market characterized by uncertainty and exuberance. His emphasis on fundamental analysis, discerning investments, and avoiding market hype serves as a valuable guide for investors navigating the complexities of today's market environment.