Emma Wall: Hello, and welcome to the Morningstar series, "Why Should I Invest With You?" I'm Emma Wall and I'm joined today by Jake Robbins, Manager of the Premier Global Alpha Growth Fund.
Hello, Jake.
Jake Robbins: Good Morning.
Wall: So, the U.S. election is looming and this is pertinent to you in particular, because U.S. stocks make up quite a large part of your global portfolio. Let's start by playing devil's advocate. Let's say that Trump wins. What would this mean for the stock market?
Robbins: Okay. Well, in what seems like the unlikely event that Trump wins, I think initially what we'd see is a very similar reaction to what we saw after Brexit. I think equity markets would fall. In the U.S., the dollar would fall. Interest rates would probably fall as well as people rush it into treasuries as a safe haven investment.
But if Trump is true to his word and he does go ahead and invests the amount of money in infrastructure that he suggests he would, if he cuts taxes as aggressively as he says he will, then that is an absolutely huge fiscal stimulus to the U.S. economy, at which point growth expectations should rise, inflation expectations would rise, the dollar should go up and that would eventually be actually very good for the equity market.
Wall: Putting that to one side that unlikely event which seems very positive despite all the negatives out there about Trump, what would happen if Clinton wins?
Robbins: So, Clinton clearly is much more of the same what we've seen under Obama. She has certain sectors where she really seems to want to regulate, healthcare being a very obvious one. The drug companies have really been raising prices far too aggressively for too long and she wishes to do something about that and we've already seen some underperformance there.
Wall Street is another area where she appears to want to regulate more aggressively than is currently done which again may weigh on some of the financial shares. But ultimately, she does promise to invest in infrastructure which America desperately needs. So, that should be a good stimulus for the domestic economy. So, things like construction and perhaps some of the consumer discretionary stocks might benefit from that kind of investment.
Wall: And your largest geographical allocation is to the U.S. How do you make decisions on asset allocation with such an unknown in the very near future?
Robbins: I think you really need to look at the fundamentals of the stocks. So, we really invest in businesses that have very strong balance sheets, very good growth prospects and can operate successfully really in any operating environment. Clearly, we've taken some money out of the healthcare sector because we do believe the operating environment will get tougher for them.
Price rises will be harder to justify. But ultimately, we think the U.S. economy is continuing to grow in quite a stable, robust manner. We think interest rates will rise. We think things like the financials in the U.S. offer very good value given that and indeed, some of the consumer discretionary stocks because of the investment that's coming we think will do well.
Wall: Jake, thank you very much.
Robbins: Pleasure.
Wall: This is Emma Wall for Morningstar. Thank you for watching.
