Friday’s Sohn Hearts & Minds conference will be the first time a group of significant global fund managers have spoken to an Australian investor audience about their views on the New World Investment Order under Trump 2.0.
Speakers at the conference, being held in Adelaide for the first time, including heavy hitters such as Howard Marks, founder and co-chair of Los Angeles-based Oaktree Capital Management, and Nick Moakes, London-based chief investment officer of the Wellcome Trust.
The approximately 600 attendees at the $3500-per-head conference will also hear from a range of other hand-picked US-based fund managers including Beeneet Kothari of Tekne Capital Management, Jordan Katz from Advent Global Opportunities, Greg Mauro of Learn Capital, Ricky Sandler from Eminence Capital, and Sumit Gautam from Scalar Gauge.
Michael Novogratz, chief executive of Galaxy Digital, will be able to talk about the future of the US crypto sector — which is roaring ahead on the back of the Trump election win — while Samir Mehta from J.O. Hambro Capital will give a view from Singapore.
It's a heady mix of global experts who will speak alongside leading Australia fund managers including Alex Pollak from Loftus Peak, Ricki Bannan from IFM Investors, Jeremy Bond from Terra Capital, Nick Griffin from Munro Partners, Chris Kourtis of Ellerston Capital and Chris Cuffe, chairman of Hearts and Minds Investments Ltd.
Speakers will include South Australian Premier Peter Malinauskas, Afterpay co-founder Nick Molnar and Australian astronaut Katherine Bennell-Pegg.
Making his first appearance at Sohn will be Anthony Liveris, the Sydney-based son of former Dow Chemical Company chief executive Andrew Liveris, who is chief executive of life sciences investment firm Proto Axiom.
The conference, which raises money for medical research, is expected to hear about potential investments in leading-edge sectors such as health care, artificial intelligence and cyber security.
It comes just over a week after Trump’s landslide election win, with investors around the world scrambling to work out what a second Trump presidency will mean.
While this year’s line-up is heavily weighted to US fund managers, Nick Moakes will be able to give a UK-based view of the world post-US election.
The conference comes as US markets have given a resounding vote of confidence in the election results with Trump expected to adopt a pro-business agenda, cutting corporate taxes and deregulating industries across the board, giving particular attention to the oil and gas sector as well as crypto currencies.
But, given the huge run-up in US stocks before the election, how long can the Trump “sugar hit” last?
A report this week by Malcolm Wood, head of asset allocation for Ord Minnett, warns valuations in the US market are already very high.
As of earlier this week, he notes, the S&P 500 was up by 4.7 per cent over the week, with the tech heavy Nasdaq up even more at 5.7 per cent, and the small cap index up 8.6 per cent.
He says stocks have already had a big rally, with the forward price earnings ratios for Trump a record for any president in the 40 years of earnings estimates.
This week’s forward PE ratio of around 22.6 times is higher than the 20.9 times of the tech bubble inherited by President George W. Bush in November 2000, and about 36 per cent above the 16.6 times of Trump’s first term.
Wood argues US markets have historically performed best with gridlock, where one party controls the White House and the other Congress, with Republican clean sweeps in the past producing the worst returns of any combination.
Trump is expected to control both houses of Congress, but the fact this has not resulted in the best outcome for the markets in the past is no guarantee of the same holding true under Trump 2.0.
Fund managers at the Sohn conference on Friday will have a more forensic view on how the Trump presidency will impact stocks and the global investing environment.
The second lens which Australian investors need to look through is the implications of the Trump presidency on China, Australia’s largest trading partner, with its demand one of the biggest single determinants for the price of commodities Australia exports.
Wood says the threatened Trump tariffs of up to 60 per cent on goods from China will “accelerate the substantial shift of US business and supply chains away from China already under way.”
But, he argues, the impact on the Chinese economy will be less than it could have been, given China has reduced its reliance on exporting to the US in recent years.
China’s share of US imports has fallen by 7.1 percentage points from pre-Trump trade war levels to 11.1 per cent, with goods from countries such as Mexico, Vietnam, Korea, Taiwan and India gaining market share in the US.
Chinese imports into the US have fallen from 2.7 per cent of US GDP in 2017 to 1 per cent of US GDP, and from 3.8 per cent to 2.5 per cent of China’s GDP.
Yet he says the Trump tariffs could still provide a negative shock to the Chinese economy by as much as two percentage points of GDP.
He notes: “if China were to enact large fiscal stimulus and reforms — Big Bang reform — it could offset this headwind”.
Australian investors with big stakes in China-exposed companies such as BHP, Rio and Fortescue will be watching the impact of the Trump presidency closely.
The Trump win will accelerate trends already taking place on global trade.
At the UBS Australasia conference in Sydney this week, former Australian ambassador to the US Arthur Sinodinos said some global companies were already dividing their operations into three units — focusing on the US, China and the rest of the world.
With the unexpectedly strong Trump win boosting US markets, while throwing a spanner in the global trading equilibrium of pre-November, there are many questions to be asked regarding what it means for Australia as the Trump presidency unfolds.
Friday’s Sohn conference will provide some important intelligence for investors facing a wild ride under Trump 2.0.
This article was originally posted by The Australian here.
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