Are there any alternatives to US assets?

After Trump’s re-election US stocks seem to be the only game in town - but some think that now is the time to increase allocation to UK markets.

The somewhat feverish mood that gripped markets after the re-election of Donald Trump now seems to easing into a near-universal sentiment: US assets are currently the only worthwhile trade.

It’s an orthodoxy that has taken hold despite the distinctly unorthodox elements of the Republican programme. The highly credible prospect of tariffs - Trump threatened a 20% levy on all imports on the campaign trail and has already pledged to increase tariffs on Chinese goods by 10% - raises the spectre of a trade war, and with it the possibility of higher US inflation and interest rates. A crackdown on migrant labour, pushing wages up, would fuel inflation further. The President-elect has also spoken of compromising the independence of the Federal Reserve, and has surrounded himself with maverick entrepreneurs keen to use US financial institutions as vehicles for crypto-driven experiments in libertarian economics.

But concerns about those and other swirling uncertainties have been swept up and way in the gale of expectations for a Republican growth programme centred on corporate tax cuts and deregulation, and the likelihood that tariffs would concentrate the US economy’s supremacy, sucking growth away from the rest of the world. Investors have not forgotten that whatever happens, the Federal Reserve retains the priceless privilege to issue the world’s reserve currency, giving the US unrivalled leeway to indulge radical economic policy.