Stefan Kreuzkamp: «Trump Candidacy Will Permanently Change the U.S.»

Stefan Kreuzkamp

Stefan Kreuzkamp

U.S. Stocks currently are highly valued. That may be about to change, depending on the outcome of the U.S. Elections, says Stefan Kreuzkamp, chief investment officer at Deutsche Asset Management on finews.first.


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Old hands on Wall Street know that it is all too easy to get carried away amid the whirlwind of proposals, debates and sound bites. The U.S. Presidency may still be the most powerful job in the world; except for foreign policy, however, there is little a President can do without congressional support.

When it comes to the things investors care about most, Congress has the power of the purse – an important reality of which the markets were reminded several times during the Obama years amidst budget standoffs and looming government shutdowns. So here are three hypotheses investors should take into account

1. It's the Elections for Congress That Count

For financial markets it matters less whether Hillary Clinton or Donald Trump move into the White House. The key question is which party wins a majority in the House of Representatives and in the Senate.

The job of U.S. president may still be one of the most influential in the world, but the president depends on support of Congress, apart from foreign policy matters. On issues important to investors there is no way past Congress, in particular in fiscal policy.

2. Don't Make Long-Term Investment Decisions Based on Hasty Election Promises

The team of a new president usually reaches firm ground after about a year in power. It takes time before a new government can really begin to act. By that time, the world has changed. Priorities change too, and all the promises have to be adjusted to fit in with reality – even if they've once been put very distinctly.

George W. Bush for instance scored points for being a «compassionate conservative» in the 2000 presidential elections and promised to keep out of getting involved internationally – history tells us a different story altogether of course. The nominations for numerous positions in government and administration create enormous logistical problems, a challenge for Donald Trump in particular.

In contrast to other newly elected presidents, he seems to lack a clear political agenda. And equally so an encompassing network of people in the know who share his convictions. That's one of the reasons why a Trump victory might unsettle the markets.

3. The Donald Trump Candidacy Will Permanently Change the Political and Economic Situation in the U.S.

The era when Republican thinking was shaped by the pro-market school of thought may be coming to an end. Trump's candidacy has already noticeably reduced the Republican support for free trade – once a key conviction of Republican politicians.

In the past 36 years, they tended to reliably support a pro-market supply-side policy and in difficult economic situations decided pragmatically in favor of anti-cyclical measures. It isn't as evident that this will remain the case. A Trump victory for instance might increase the already existing pressure in Congress to cut the freedom of maneuver of the Federal Reserve.

But even if Trump loses, others no doubt will attempt to make use of his recipes. Hillary Clinton was equally pushed to the left by Bernie Sanders campaign. It remains to be seen whether she manages a successful shift and she receives the mandate for a pro-business policy similar to the one pursued by her husband.


Stefan Kreuzkamp is the Chief Investment Officer of Deutsche Asset Management, based in Frankfurt. He joined the company in 1998 with three years of industry experience. Prior to his current role, he served as Chief Investment Officer EMEA and Head of Fixed Income & Cash EMEA.

Previous positions include Co-Head Fixed Income EMEA, Head of Fixed Income for the retail business in Europe and Head of Money Market for Europe and Asia. Before this, he was a portfolio manager for money market funds and fund of funds in Luxembourg. Stefan started his career as a researcher at DekaBank in Frankfurt. Stefan Kreuzkamp holds a Master's Degree in Economics (Diplom-Kaufmann) from the University of Trier.


Previous contributions: Rudi BogniAdriano B. Lucatelli, Peter Kurer, Oliver Berger, Rolf Banz, Dieter Ruloff, Samuel Gerber, Werner VogtWalter Wittmann, Albert Steck, Alfred Mettler, Peter Hody, Robert Holzach, Thorsten Polleit, Craig Murray, David Zollinger, Arthur Bolliger, Beat Kappeler, Chris RoweStefan Gerlach, Marc Lussy, Samuel Gerber, Nuno Fernandes, Thomas Fedier, Claude Baumann, Beat Wittmann, Richard Egger, Maurice Pedergnana, Didier Saint-George, Dieter Ruloff, Marco Bargel, Peter Hody, Steve Hanke, Andreas Britt, Urs Schoettli, Maurice Pedergnana and Ursula Finsterwald.

 

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