Investors must face up to the reality that there is a growing danger Mr Trump will be unable to get his proposed reforms – which are heavily priced into equity markets – off the ground. There is also the potential impact on markets of a ‘rogue tweet’ from the president, which may be one of the more unusual risks in financial markets.
So, what does this all mean for investors? As always, diversification is vital. Diversification across sectors and asset classes can help to protect investor downside during periods of heightened volatility.
In bond markets, we expect a gentle tick up in yields as we move through the second half of the year, meaning it is prudent to have fixed income allocations at a slightly shorter duration and term than the benchmark.
Short-duration positions can help investors mitigate the potential impact of higher rates in the future. We also have a preference for credit over government bonds, with corporate bonds remaining well supported by the actions of the European Central Bank.
As for UK real estate, we remain cautiously optimistic towards the asset class. While capital values may not see any major increase in 2017, property will continue to deliver steady income generation.
David Marchant is chief investment officer at Canada Life UK and managing director at Canada Life Asset Management
Expert View: UK equities
Paul Mumford, senior investment manager at Cavendish Asset Management, comments on the outlook for UK shares amid Brexit negotiations:
“In psychological terms it is much better to be in this position – to have been prepared for the worst only to see the situation isn’t all that bad – than the reverse. This can trigger bouts of relief and enthusiasm that lay fertile ground for rallies. Markets are waking up to the fact that, for all the sound and fury we’ve seen over the past year, a lot of good, solid UK companies are not all that affected by EU membership one way or another.
“The one unmistakable effect of the EU referendum has been the fall in sterling. But this has proven a boon for exporters, as well as those with overseas earnings. The flip side here, of course, is that sterling’s fall will on balance hurt domestic brands such as retailers.”
Net retail sales of equity funds by region
| Region | Net retail sales in April 2017 | Average monthly sales over previous 12 months |
| Global | £1.2bn | £314m |
| North America | £299m | -£3m |
| Europe | £255m | -£317m |
| Japan | £233m | -£72m |
| UK | £104m | -£340m |
| Asia | -£47m | -£81m |
| Source: Investment Association | ||
