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Donald Trump at a rally
Reuters/Carlo Allegri
Long lingers Trump.
POLITICS OF TRUMP

Even if Trump loses, this billionaire asset manager thinks investing will never be the same

By Eshe Nelson

Win or lose, Donald Trump will live on in American politics. His people, voters who feel disenfranchised by the elite, will continue to push against free trade and open borders long after Nov. 9.

That will most likely lead to a raft of populist and protectionist policies as politicians try to quell the concerns of voters, says French asset-management company Carmignac, which manages €53 billion ($58 billion). Already in the UK, the government is putting priority on curbing immigration over access to the single market as the UK considers how to leave the European Union.  A small region in Belgium almost torpedoed the EU’s most ambitious free trade deal as other European countries see support for far-right parties grow.

In a letter to investors, Edouard Carmignac, the co-founder and chairman of the company, wrote that “our values and well-being are under attack.” Carmignac foresees the “advent of a new economic and financial order” and is rewriting his company’s investment strategy to suit it.

Protectionist policies are likely to boost government spending while central banks keep monetary policy loose. That will result in more issuance of government bonds at a time when inflation is likely to pick up, Carmignac says. Inflation is bad for bonds as it cuts the purchasing power of their returns. His letter says:

We will therefore be taking a cautious stance on developed-country sovereign bonds. After a more than 35-year bull run that has kept their prices up, they now have little more value to offer. In contrast, equities stand to gain from accommodative fiscal policies, which would reassure investors about economic stability, provided that interest-rate hikes don’t get out of hand.

This could be quite a shake up for Carmigac where 60% of the assets it manages are held in bonds. Sovereign bonds from the UK to Australia already are selling off. Germany bonds are having their worst month in almost four years and the price of US Treasury bonds has dropped so much that the yield is the highest since May. Dutch bank Rabobank has described the sell-off as a “bloodbath” (paywall) and ANZ bank is pondering whether this is “it” for the bond market.

But why worry about bond investors? They’re worried that inflation is rising, economic growth is quickening and that central banks won’t have to do so much. This is good news for the rest of us.