US small and mid-cap equities will be the ones to follow, in the age of Trump

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His promises to lower taxes, reduce regulation on businesses and pump money into infrastructure projects brings a bright start for equity investors in 2017

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Demand for multifamily housing in the US relative to single-family housing has peaked since its highs in 2011. Now, older millennials, with more stable incomes and growing families, are driving the interest in single-family homes. Photo: AP

Jenny Jones

Published: 4:00pm, 3 Mar 2017Updated: 11:53am, 4 Sep 2017

Now the Donald Trump presidency is a reality, it does seem to argue for investments in more US-centric parts of the market.

At Schroders we believe he will achieve many of his goals, but they seem to be close to fully priced in. Wall Street tends to get ahead of itself at times, and this appears to be one of those times. While Trump’s hostility to foreign trade agreements is troubling, his policies do seem to offer some investment possibilities.

Thanks to the “Trump Rally”, US equities were the best place to be in 2016. They surged post-election, driven up by the three B’s: banks, building (infrastructure-related stocks) and (anticipated tax) breaks.

There seems to be a general belief that Trump’s policies will be positive for GDP growth. His promises to lower taxes, reduce regulation on businesses and pump money into infrastructure projects brings a fresh start for equity investors in 2017.

While hopeful these changes will come into effect in early 2017, it’s more realistic that decreased tax rates kick in closer to 2018. In this environment, we see significant growth opportunities with small caps taking shape this year

So a Trump presidency augurs well for investments in more US-centric parts of the market. The post-election US stock rally has driven up biotech, pharmaceuticals and infrastructure stocks.