French asset manager Carmignac has revealed how it has positioned the flagship Carmignac Patrimonie fund after the election of Donald Trump, an event the firm sees as representing a failure of economic policy.
The fund has taken a short position on US sovereign bonds, increased exposure to commodities, and maintained exposure to gold, among other measures.
The fund also continues to invest in emerging markets, but expects volatility in the coming weeks.
Didier Saint-Georges, managing director and member of the investment committee, said monetary policy “can only do so much” and more countries were displaying enthusiasm for greater fiscal stimulus.
“Even after years of quantitative easing and rock-bottom interest rates, economic growth has almost everywhere been consistently disappointing for the past eight years,” he said.
Every election seems to offer the opportunity to push a different economic agenda focused on more fiscal stimulus and, in some cases, less open borders, Saint-Georges added.
“Donald Trump’s victory at the polls is therefore a symptom of broader failure; it attests to a rejection of the neoliberal globalisation ‘regime’ that has [speeded] up since the 2008 crisis.”
Saint-Georges also said that industrial and cyclical stocks have bounced back from the lows hit in January and February to outperform stocks in other sectors – a development he described as a “telling sign” of the shift under way from monetary to fiscal support.
The increase in exposure of the €24 billion fund to commodities and cement manufacturers is meant to benefit the fund as fiscal stimulus programmes gain ground.
Similarly, the continued exposure to gold stocks is “in order to manage the tail risk of diminished medium-term central bank credibility at a time of renewed inflation”.
Another measure of the fund has been to rebalance dollar and euro positions, at the expense of the yen and the emerging currencies, due to the impact of Trump’s programme on the dollar – specifically the inflow of capital into the US that supports the dollar, and a US rate hike.
©2016 funds europe
