Since Donald Trump was elected as President ten months ago, he’s promised to build a wall between America and Mexico, threatened war with North Korea and faced repeated allegations of links to the Russian government.
Yet, in that time, the U.S. stock market has shot up. If you’d invested in the U.S. after November’s election, you would be sitting on returns of more than 12 per cent now, turning £10,000 into £11,260 in less than a year.
The market has been buoyed by Trump’s promise to introduce sweeping tax cuts for businesses and the middle classes, as well as to spend $1 trillion on fixing America’s roads, bridges and train tracks.
Hitting the wall? In the 10 months since President Trump was elected US share prices have shot up, but there are now signs the good times may be coming to an end
But share price rises tailed off after his most recent outburst, when he failed to condemn white supremacist groups involved in violent riots in Charlottesville, Virginia, last month.
Since then, Trump has faced an exodus of his top advisers. He’s also failed to get through most of his major reforms, having been blocked repeatedly by Congress, the U.S. parliament.
And now, despite recording the strongest economic growth for more than two years, analysts are warning of a brewing debt crisis in the U.S. as politicians argue over whether to borrow more cash to fund government spending.
So, with the threat of nuclear war intensifying, is the American stock market rally and the so-called Trump Bump coming to an end? Some experts believe so, and they say savers who have made big profits over the past ten months should consider cashing in.
Ben Yearsley, of adviser Shore Financial Planning, says: ‘You should always look long-term when you’re investing, but the U.S. companies are looking expensive — their share prices are now high compared to the value of the companies — and the political situation is troubled.
‘So there is absolutely nothing wrong with taking out some of the profit you’ve made and investing it elsewhere.’
Global risk firms, which large companies hire to assess the political situation and the dangers — and benefits — of doing business in different countries, are highly concerned about President Trump’s war-mongering with North Korea.
Iain Anderson, of Cicero Group, says this is the ‘biggest threat’ to America’s stock market and economy. ‘Crazed foreign policy is more likely to have an impact on markets — and that’s not a positive effect — than what Trump’s budget looks like or what his policies towards trade or financial regulation look like,’ says Mr Anderson.
‘Trump is increasingly hemmed in by Congress on domestic issues such as tax changes and building his wall. But the area where no president is hemmed in is on foreign policy — and that is where he has real power to act and upset the markets.’
Share price rises tailed off after Trump’s most recent outburst, when he failed to condemn white supremacist groups involved in violent riots in Charlottesville, Virginia, last month
Fund managers who in the past favoured the U.S. are beginning to look overseas, to places such as Europe and China.
Marcus Brookes, manager of the £833 million Schroder Multi-Manager Diversity funds, says if he could, he’d ‘short’ the U.S. stock market. That means he would bet against it rising further and cash in from any falls.
‘This is nothing to do with the economy — it’s to do with the value of the stock market,’ he says. ‘Unless we were to see some new, good news, America doesn’t look attractive in any manner to us — particularly when you can go and invest in Europe, where the economic picture is picking up quickly.’
Kevin O’Nolan, manager of the Fidelity Multi Asset Allocator funds, says: ‘I just think there are better places to invest. Some of the data we looked at for the U.S. suggests that it is all right, but momentum has slowed.
‘The hope that the Trump administration would deliver good things for business has faded through the year — even more so in the past few weeks.
‘I like Europe. The most recent trade I made was to ship money out of the U.S. and into Europe.’
Darius McDermott, of broker Chelsea Financial Services, recommends Henderson European Focus for savers who want to switch their money from the U.S. to Europe. It has turned £10,000 into £21,790 in five years.
Ben Yearsley thinks there are good investment opportunities in China and other emerging economies, such as India and Indonesia.
Bogey man: Kim Jong Un inspects a nuclear device. Global risk firms are highly concerned about President Trump’s war-mongering with North Korea
He recommends Lazard Emerging Markets, which has turned £10,000 into £15,020 in the past five years, and First State Asia Focus, which has returned £16,620 since it launched in August 2015.
Meanwhile, Jason Hollands, of broker Bestinvest, recommends Stewart Investors Asia Pacific Leaders, which has turned £10,000 into £17,650 in five years. However, Mark Dampier, of stockbroker Hargreaves Lansdown, believes getting a better return away from the U.S. is easier said than done.
‘I would never make an investment decision purely on who is in power,’ he says.
‘Yes, America is one of the most expensive places in the world to invest right now, but there are firms there doing well.
‘If the American market were to fall 20 per cent, I would say virtually every other market would follow it down. And some of them would fall even further.’
For those who are still keen on America, the best-performing U.S. fund since Trump was elected on November 8 is JPM US Smaller Companies, which has turned £10,000 into £12,696 since then and into £23,110 in five years.
The next best performer is Baillie Gifford American, which has turned £10,000 into £12,140 in that time. If you invested £10,000 in the fund five years ago, you’d be sitting on £24,650 now.
Internet giant Amazon, electric motor firm Tesla and Facebook account for more than a fifth of the money that it invests.