Investor reaction to Donald Trump's victory over Democratic presidential candidate Hillary Clinton in the 2016 US Election has been largely negative, with warnings about the implications of his win for the US economy and stockmarket.
US equities
Viktor Nossek, director of research at WisdomTree, said a Trump victory is likely to cause equity volatility due to increased uncertainty around the country's future policies.
"His seemingly isolationist policy stance on immigration and transatlantic trade and military alliance is adding to the uncertainty," said Nossek.
"Investors should consider hedging equity exposure through shorting and buying market volatility, or allocate into safe havens initially. When the dust settles, the lower valuations of domestic-focused equity exposures are likely to gain appeal."
Similarly, Lars Kreckel, global equity strategist, asset allocation, at Legal & General Investment Management, warned a Trump victory will deliver the greatest market impact.
"We would expect earnings to benefit from Trump fiscal stimulus but this to be more than offset by a lower PE on the basis of significantly higher uncertainty."
Likewise, John Stopford (top right), head of multi-asset income at Investec Asset Management, said he believes Trump's victory will be significantly negative for risk appetite, with equities and other growth assets falling sharply.
It will benefit defensive currencies like the yen at the expense of currencies at risk of a more hostile trading environment, such as the Mexican peso, Chinese renminbi, and Korean won.
"The implications for Treasury market duration appear more uncertain. Normally, treasuries would be expected to rally on a risk-off event, but given Trump's expansionary fiscal plans, the outcome is less clear," said Stopford.
Emerging markets
Jan Dehn (right), head of research at Ashmore, said emerging markets are likely to continue a period of outperformance regardless of Trump's victory, as the president will be constrained both politically and economically, with policy changes likely to be "slow and less extreme than expected".
He said: "We expect that Donald Trump would have the support of the House of Representatives. He would seek to cut taxes for corporates and aim to develop more infrastructure investment.
"Forget the wall with Mexico and other anti-immigration rhetoric. Hence, you could consider buying into bouts of risk aversion, especially EMs."
