As US president Donald Trump storms ahead with his policy agenda to kick off his return to office, it is worth considering what his second term will mean for your investments.
Trump signed a slew of executive orders and actions following his inauguration on Monday. This included invoking a national energy emergency, as well as approving a withdrawal from the Paris climate agreement.
The newly reinstated Republican president didn't immediately impose any trade tariffs but made it clear that levies were coming. He said on Monday evening that he was "thinking in terms of 25%" tariffs on Mexico and Canada, adding that he was likely to enact the duties on 1 February. As for China, Trump said on Tuesday that he was mulling a 10% tariff on the country's goods.
Trump also signed a presidential action on inflation, that directed then "heads of all executive departments and agencies to deliver emergency price relief" to bring down costs.
These were just some of the actions Trump unleashed in his first day back in the White House.
Markets were closed for Martin Luther King Jr Day on the day of Trump's inauguration but US stocks rose on the first full day of trading with the Republican president back in power on Tuesday.
Russ Mould, investment director at AJ Bell (AJB.L), said Trump was a "master of unpredictability".
"Just as markets think they’ve sussed his next move, he either does something different or nothing at all," he said.
Mould said the "big surprise" was the lack of immediate action on trade tariffs, given Trump's talk around the subject in the run up to his return to the White House.
"The one area where Trump took decisive action was illegal immigration and this poses a big threat to labour costs in the US," he said.
"It threatens to reduce the pool of workers for construction and agricultural industries, meaning companies might have to pay more to attract staff. Trump promised to lower prices for the American public, yet already on day one we’ve got policies in action that have inflationary consequences."
Investors will be weighing what these early actions mean for the rest of Trump's second term and experts have highlighted a number of funds to consider for this presidency.
Trump 2.0 fund picks
Victoria Hasler, head of fund research at Hargreaves Lansdown (HL.L), said that the lead up to Trump's second presidency has been noisy and given that markets dislike uncertainty, "the simple fact of having the new president settled in the White House may prove to be a good thing for markets."
"Over the next few weeks and months, we (and the rest of the world) will be watching closely, listening to the speeches and analysing the policies," she said. "No doubt some will have a more positive impact on markets than others — expect some fireworks and associated volatility as we navigate the next four years."
Hasler said that Trump's policies could be positive for smaller US companies, given trade tariffs favour domestic businesses over international ones and smaller firms tend to be more domestically focused.
With that in mind, she suggested investors look at Artemis US Smaller Companies fund, which has been managed by Cormac Weldon since its launch in 2014.
"We like the way the manager considers how the US economy is performing to actively identify sectors and companies that are benefiting from trends, as well as areas that are finding things tough," Hasler said.
"We believe this could stand the fund in good stead to take advantage of new or changing policies put in place by the new president."
Top holdings in the fund include investment bank Jefferies Financial Group (JEF) and car rental company Hertz (HTZ).
According to data provided by Hargreaves Lansdown, the fund has delivered a return of 25% over the past year, which is higher than the Investment Association (IA) North American Smaller Companies fund sector average of 12.75%.
For those unsure as to what a Trump presidency could mean for markets globally, Hasler said an active global fund could be an option to consider as the "manager can worry about the risks for you".
She said that Rathbone Global Opportunities is one fund to consider to add some global diversification to your portfolio.
"James Thomson, the fund’s manager, is one of only a few global fund managers to show they can pick great companies and perform better than the broad global stock market over the long term," Hasler said.
"He looks for easy-to-understand businesses that can grow to dominate their industry and defend themselves from competition," she said. "He'll also search off the beaten track to find companies with superb potential that might be overlooked by other investors."
"Thomson thinks exceptional companies are few and far between, so he only invests in a small selection," Hasler added. "This gives each the potential to contribute significantly to performance."
Chipmaker Nvidia (NVDA) and wholesale retailer Costco (COST) were the two top holdings in the fund as of the end of December.
The fund has generated a return of 17.5% over one year, which is ahead of the IA Global IR sector average of 12.49%.
For those unsure as to what a Trump presidency could mean for markets globally, Hasler said an active global fund could be an option to consider. ·REUTERS / Reuters
Hasler said that a more defensive fund could be an option for investors concerned about the impact of tariffs or political instability on the geopolitical situation.
She said that the Troy Trojan fund "aims to grow investors' money steadily over the long run, while limiting losses when markets fall."
The fund is split into four pillars, the first of which is large established companies that the managers think can grow sustainably.
The second is made up of bonds and the third is gold-related investments.
"We don’t think that gold will repeat the 30% return of 2024, but we do think it holds its value this year," said Hasler.
The final pillar in the fund is cash, which Hasler said "provides important shelter when markets stumble, but also a chance to invest in other assets quickly when opportunities arise".
Gold exchange-traded funds accounted for the top two positions as of the end of December, while stocks in the fund included consumer goods giant Unilever (ULVR.L) and credit card firm Visa (V).
The fund's one-year return of 6.7%, has beaten the 3.5% rise in the UK retail price index.
FTF Clearbridge Global Infrastructure Income (0P0001MVA6.L)
Meanwhile, Alex Watts, fund analyst at Interactive Investor, said that Trump had been vocal, both in his first term and ahead of this inauguration, about his intention to "rebuild" infrastructure in the US.
His fund pick to benefit from this trend is the FTF Clearbridge Global Infrastructure Income fund, which is invested across a range of infrastructure-related equities.
Watts explained that the fund aims to generate income from dividends of underlying companies and to deliver capital growth above inflation over a five-year period.
He said that the managers "focus on regulated and contracted utilities, such as water, electricity as well as user-paying assets."
"The team looks for businesses with predictable cash flows, healthy yields and quality asset bases."
Top holdings include Entergy Corporation (ETR), an energy company that operates in the south of the US, as well as UK water company Severn Trent (SVT.L).
The fund has more defensive style and offers a yield of 4.5%. Watts said that it "has proven it can deliver capital appreciation alongside a steady dividend distribution, which has made it one of the best performing funds in its sector over the long term."
The Neuberger Berman US Multi-Cap Opportunities fund invests in familiar large/mega-cap companies, such as Microsoft and Apple as well as mid-cap names. ·REUTERS / Reuters
Neuberger Berman US Multi-Cap Opportunities (0P0000YJH1.L)
For those who want differentiated exposure to the US, compared to the tech stocks that dominate the S&P 500 (^GSPC), Watts puts forward the Neuberger Berman US Multi-Cap Opportunities fund as an option.
"While the fund is permitted to and does invest in familiar large/mega-cap companies, such as Microsoft (MSFT) and Apple (AAPL), the manager diversifies also into mid-cap names and, as such, the average market cap of the fund of $700bn (£568bn) is notably less than its S&P 500 benchmark’s $1.1tn," said Watts.
Other companies held in the fund include investment management firm Brookfield Corporation (BN) and packaging solutions company Graphic Packaging Holding Company (GPK).
"Compared with its flex-cap peers, the fund is a strong performer over the past decade despite a relatively neutral style profile that has been less in favour than a more growth-focussed option," he said.
The pound share class of the fund only recently launched, so Interactive Investor only had returns data for the US version of the fund. According to data provided by Interactive Investor, this showed that the fund generated a return of 22.8% over one-year.
