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00:00Is it overdone way you look at this and you go hang on a second . There is a point when you think maybe it's time to buy. Yeah I think it is overdone. I think investors making a lot of assumptions about exactly what Donald Trump means for particular markets and I think emerging markets is one of those areas where people just assumed that he's going to be an absolute disaster . But we have to separate manifesto from actual policy and the pathway between the two is often quite rocky and unpredictable . One of these people that believe that Trump a candidate is going to be very different or rather trump the president is going to be very different from Trump the candidate I suspect. He could well be I mean I think he chose he prosecuted his campaign on the basis of what would actually get him into the White House . But we've already seen some signs of kind of rollback in terms of translation between the two. For example on on Hillary Clinton the rhetoric was all about lock her up crooked Hillary and then his acceptance speech he talked about the nation owing her a debt of gratitude. So I suspect we're going to see quite a bit of that across the board particularly on economic policy . Doesn't mean there's not going to be a little bit more rhetoric about protectionism and maybe some token gestures but. But I think a lot of these moves are especially overdone and maximum passive is a prime example. Well absolutely. It was interesting as a contrarian call by you guys. Go Long the peso but how long do you go for. Well yeah I mean I think it's sunk quite a lot and then it made it made a bit of a recovery. So I think I think the significantly more to go purely because the expectations have become had become so gloomy and depressed on the basis that you know Mexico exports 82 percent north of the Rio Grande Dame that this would automatically be a disaster . But again I think investors need to be very careful about what they're assuming on this candidate and particularly around event risk as well I think investors get hung up on certainties or perceived certainties. You look at 9/11 for example everyone thought hey defense stocks are going to do great and people are thinking the same post trump the defense stocks are gonna are gonna do great and Trump is going to sort of roll back the kind of defense guarantee from Europe and Japan they're gonna spend more money on defense stocks in 2001 2002 defense stocks are actually down. So we're just going to be really careful about assuming hey this is the policy and this is the market effect . They sort of reasonable sensible places to go at the moment I mean we know that tech is probably going to continue to come under pressure. We know that energy infrastructure will probably do well. Or do you say you might stay on the sidelines a bit until we get any details about how much is actually going to go for this infrastructure investment binge it how much pressure is actually going to put on trading partners like China . I think infrastructure is probably okay purely because there's such cross-party consensus on it and everyone's screaming out this was required. You look at Larry Summers and others I think infrastructure is a reasonable bet if it hasn't already been bid up a lot of what Barack Obama tried to do that with infrastructure build that was actually blocked there that is because of gridlock and the fact that they may not be gridlock may be a positive overall to be able to sort of oil the machine of the economy where it needs to be massive as well . This is the other point I think Obama's initial stimulus post the crisis was 800 billion dollars but basically very few bridges were built as a result of that. So it really really needs to be meaningful. And I think that's what the bond market is pricing in. But to your point of you know how do you invest . I think you've got to look at things which existed before and are independent of this this result. And infrastructure is probably one because I think it was going to happen anyway and rising bond yields also there was a big sort of impetus behind rising bond yields anywhere you look at the sort of global exhaustion with monetary policy and QE the sense that you're gonna have easy policy forever. I think that was coming to an end anyway. So the sell off that we've seen is really an acceleration of an existing trend. Absolutely. And you know the way that we've seen yields spike up again is not been overdone. That's but. I mean it's been very quick but it's true. But but I think the yields are still relatively low. And I think a lot of certainly a lot of bond investors Bill Gross included his who said that the bond market was a supernova about to explode. I think these points are still relevant but it's just happened a little bit quickly which can be a little bit of a worry for em. I think E.M. has a good chance of withstanding Absolutely. If we do see a bit of an implosion when it comes to the bond market I get that money is going to go. There's going to be money there's going to be of course people changing asset classes. Does the equity market actually benefit overall as a result of that. And will bonds are more overvalued than equities if you sort of take the kind of PE of bonds as of about a few weeks ago trading at sort of 63 times equivalent. Mean as we know equities are trading more sort of if you look at the Cape it's more like 27 times. So equities do seem to be better value in that sense and I think Trump is what I just said about predicting exactly which areas the market is going to do well . But my suspicion is Trump is generally going to be pro-growth . So I think cyclicals and value may may stand a good chance. And very interesting how I guess market sentiment has readjusted so quickly because you know a day before the election the consensus was Hillary in the White House with a divided government is going to be best for equities because it is just you know steady as she goes. Now there's a lot more people saying Trump in the White House with a mandate. This is gonna be pro equities . Yeah no I think that's true but I also think that if you look at the two events of earlier this year we've had two big by sort of big event risk occasions and I think the first one was the Q1 China growth scare and then of course Brexit these actually provided quite a good template for how equity investors should probably behave going into the election and that is look at the fundamentals. Global growth is it's not brilliant but it's okay . Earnings in the US in the US are again not brilliant but they're okay. So both on both fronts. It didn't make sense to go massively short on equities even with a Trump victory. Those two fundamentals were still in place in fact Q3 earnings in the US suggested that America was coming out of earnings recession . You know the beats rate was higher than it normally is even adjusting for the kind of Wall Street expectations .

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GAM: Investors Need to Be Careful About Trump Assumptions

Julian Howard, investment director at GAM, discusses Donald Trump's presidential win, his perceived effect on the markets and where he's seeing opportunity. He speaks to Bloomberg's Rishaad Salamat and Haidi Lun on "Bloomberg Markets." (Source: Bloomberg)

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