Up from its position in third last year, financials nabbed the top spot in the AIC’s survey of most favoured sectors, closely followed by technology, favoured by 21% of managers, and commodities and natural resources, the third most popular for the second year running at 16%.
The annual AIC poll also found 40% of managers expected the US to outperform in 2017, and 37% expected it to continue to outperform for the next five years.
President elect Donald Trump’s promises to reflate the economy was seen by 13% of those polled as a reason to be cheerful next year, however interest rates remaining low and an increase in earnings were the top reasons to remain optimistic at 19% each.
Bruce Stout, manager at Murray International, said Trump’s campaign promises to spend more on infrastructure and adopt a protectionist stance on trade could be bad for emerging markets, such as Latin America, but added: “These policies will also have domestic consequences – higher inflation and ultimately slower growth are just two – which could force a reappraisal. There is some thought that Trump may tone down his rhetoric now that he’s secured the prize. While that remains to be seen, having control of both Congress and the Senate could prevent the gridlock we’ve seen over the past six years with President Obama.”
However, it seems to Paul Niven, manager of the Foreign and Colonial Investment Trust, that investors have been too focused on Trump’s promises.
He said: “There is a clear risk that the market is getting ahead of itself in terms of how much Trump will ultimately deliver. The outlook for the US economy and market was already improving and fiscal stimulus may be pro-cyclical – with the downside that monetary policy will tighten further if inflation expectations continue to rise.”
Overall the poll recorded a more positive outlook among managers from 342 companies, with 77% expecting markets to rise in general next year which, though up from 60% last year, still lags behind the 91% recorded in 2014.
