Trump Rally Is Overdone, Outperforming Australian Fund Manager SaysBy
Better returns can be gained in Europe, Asia, Antipodes says
U.S stock market offers ‘happy hunting ground’ for short bets
The Trump-induced rally in U.S. stocks has been overdone and better returns are on offer in Europe and Asia, according to Jacob Mitchell, the chief investment officer at Antipodes Partners Ltd.
“Not many stocks in that area actually demonstrated a margin of safety to begin with, so they were already expensive,” Mitchell said in an interview in Sydney Tuesday. “Now they’re a lot more expensive.” His global equities fund last year gained almost double the 8.4 percent return of the MSCI All Country World Net Index in Australian dollar terms.
Donald Trump’s surprise election victory spurred a rally in U.S. stocks after he flagged plans to stoke the world’s biggest economy by funneling $1 trillion into infrastructure spending to spur jobs growth. The post-election rally has added more than $3.9 trillion to global equities as investors dumped haven assets such as government bonds.
Mitchell joins other investors in questioning the longevity of the Trump rally.
Ray Dalio, who runs the world’s largest hedge fund and in November was bullish on Trump’s ability to stimulate the economy, now says he’s more concerned that the damaging effects of populist policies may overwhelm the benefits of a pro-business agenda. Billionaire George Soros last month called Trump a “con-man” and said the equity rally will come to a halt.
Sydney-based Antipodes, which also runs a long-short strategy that returned 17.2 percent in the 12 months ended Dec. 31, prefers European financial companies such as ING Groep NV for their exposure to the eurozone economy. It also favors Asian companies such as Hyundai Motor Co. and Chinese search giant Baidu Inc.
While Antipodes holds long positions in U.S. stocks such as Microsoft Corp. and office product chain Office Depot Inc., it also sees the North American equity market as fertile ground for shorting opportunities, Mitchell said. The health care sector will yield both “winners and losers” as Trump rolls back Obamacare.
The U.S. is “a pretty happy hunting ground for longs and shorts,” he said. “Inevitably there will be disappointments around policy and if you can find weak businesses that are over-earning -- we’ve got a few in mind -- they’ll end up being reasonable shorts.”