LOM expert sees Trump as boost for investors
The Trump presidency could be good for business and investors, an island asset management firm said yesterday.
Bryan Dooley, general manager of LOM Asset Management, said: “We see a lot of positives — the whole pro-business attitude is good for markets.”
He added: “If the US economy continues to do well, that should be good for a lot of countries.
“And Bermuda is, in a way, part of the whole North American continent.
“If people have some money in their pockets, they will travel more, come to Bermuda and spend money.”
Mr Dooley was speaking after he delivered a talk to investors on “Trumponomics and the New World Order” at the Hamilton Princess yesterday and how to continue to invest with success after world-shaking events like President Trump’s surprise win and the UK’s unexpected decision to vote to leave the European Union.
Mr Dooley said that Trump’s desire to cut tax rates and a likely move to higher interest rates would stimulate business and the US economy.
But he added: “What I heard talked about is taxes go down too much in the US, that could hurt the progressive fiscal tax position of Bermuda, which has been one of its attractions.
“If the US cuts tax rates too low, that will impact.”
He said, however: “The insurance sector is doing better and they should do even a little better based on higher interest rates.
“An insurance company makes money collecting premiums and doing a good job managing the premiums against the risks.
“The other side is they make money on their investment portfolios — if interest rates go higher, they earn more on their premiums.”
Mr Dooley added that, because of uncertainty over the results of the US election last year, investors had tended to sit on their cash.
He said: “When the election happened, it had to go back into the market.”
Mr Dooley predicted that investors are set to favour emerging markets over established ones like the US.
He explained: “Emerging markets have been growing more than developed markets for a while. For the last several years, they’ve been growing faster, but at a slower rate than before.
“Just this last year, we’ve been seeing them accelerate again.”
Mr Dooley added: “We’re starting to see profit growth, which ultimately drives share prices. A tax cut would really be the icing on the cake.”
And he said: “The US seems to lead the world, one way or another. The US leads the markets in a lot of ways.”
Earlier, Mr Dooley told the audience of investors: “I’d like to say last year was a year of surprises — Brexit wasn’t supposed to happen either and the Cubs weren’t supposed to win the World Series.”
He added that, contrary to predictions, the stock market in the US had gone up after the Trump victory, while the US dollar was trading at a near-15 year high.
Mr Dooley said that America appeared to be moving away from reliance on monetary policy, where the central bank was relied on to “bail out the country”, to fiscal stimulus.
And he said the growth of nationalism in the US and in the EU, as seen with Britain’s exit, signalled that countries would move away from multilateral trade agreements like the North American Free Trade Association, to “more bilateral, country-specific treaties” as well more corporate and personal tax cuts.
But he added: “That in itself created uncertainty — there might be better trade agreements when they’re finished, but there is uncertainty.”
And he added that corporate tax cuts in the US would benefit some sectors, but hit others.
Mr Dooley said: “Companies that need to import goods from other countries might be hit.”
But he added that healthcare and biotech would be boosted by a reduction in threats to regulate pricing being less under the Republican administration, while industry, including defence, was set to benefit from a massive increase in infrastructure spending.
Mr Dooley said: “The US tax plan, as it is currently written, would result in a six per cent increase in corporate earnings.
“We see growth in 2017 starting to accelerate — global growth as well.”