The recent election of Donald Trump as president has led hedge funds, such as BlueBay and Phoenix Holdings, to rapidly adjust their portfolios. Trump’s pro-corporate policies, including possible tax cuts and financial deregulation, are influencing his reorientation of investments toward crude oil, U.S. Treasuries and U.S. banks.
Focus on US Treasuries as yields rise
Following the election result, US Treasury yields hit four-month highs. Russel Matthews, senior portfolio manager at BlueBay, sees this increase as a possible reaction from “bond vigilantes,” those investors who abandon government debt when they fear spending and debt will grow too much.
BlueBay has taken a “short” position in 30-year bonds, betting on their fall in value, while remaining “long” in 10-year German Bunds. In addition, the fund has reinforced its position in the dollar, anticipating its strengthening, and is betting against the euro and the pound sterling.
Impact on the financial sector: a bullish outlook for US banks
The steepening yield curve, along with potential financial deregulation under Trump, has driven a positive view on undervalued financial firms such as Citigroup, according to Matein Khalid, CIO of Phoenix Holdings.
Relaxing regulations around capital, asset management and mergers and acquisitions could benefit the banking sector in the United States.
Energy sector: national expansion and geopolitical risks
Trump’s support for the energy sector, especially in terms of reducing environmental restrictions, could have an impact on crude oil prices.
Its “drill, drill, drill” approach could increase U.S. oil production, potentially driving down prices locally.
However, the market is also watching Trump’s foreign policy regarding Iran. Sam Berridge of the Strategic Natural Resources Fund warns that stricter sanctions on Iranian oil exports would limit global supply, which could keep crude prices elevated, largely dependent on Chinese demand.
Conclusion
With Trump’s victory, hedge funds are readjusting their strategies to take advantage of opportunities and manage volatility in various sectors.
Funds such as BlueBay and Phoenix Holdings are positioned to take advantage of the expected changes, especially in energy and finance, where the new regulatory landscape could drive growth and create significant investment opportunities.
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