While many speak of the so-called ‘Trump rally’ with markets rising, both Calich and Tomlins see more risk in the US and reveal they are slightly more cautious towards the country than others.
Markets have priced in for a raft of infrastructure spending programmes and the economic boost that could come with it, but Calich points out that in reality these programmes take years to get off the ground and the real impact will be minimal in the coming years.
Calich, manager of the M&G Emerging Markets Bond Fund, said US policy would be a key theme for 2017 but that markets were “overweight” based on skewed expectations.
“The market is a little bit overweight [on US assets], while I would be more underweight, it is pricing in the effect of infrastructure spending already but it actually the process of getting things moving is quite lengthy,” Calich said.
Tomlins, manager of three high yield funds including the Global Floating Rate High Yield Fund, agreed the market could be over-optimistic and said he has moved from a favourable view of the US six months ago, to looking more towards the European high yield market.
He added he had become more “thick skinned” to political changes after the shocks of 2016, but expressed his concern that investors in the US may have built markets up beyond what is justified.
