Investors around the world are starting to worry about President Trump’s policies.
According to the Bank of America Merrill Lynch Global Fund Manager Survey, published February 14, investors ranked protectionist policies as the number one risk to the eight-year equity bull market, ahead of high rates, a “financial event” and weaker earnings.
The BAML Fund Manager survey is a monthly survey of 200-250 primarily long only investors.
The biggest “tail risks” fund managers see are European elections raising disintegration risk, followed by trade war and a crash in global bond markets. A “tail risk” refers to the risk of an asset moving more than three standard deviations below its current price.
Indeed, three weeks into his presidency, the so-called “Trump trade” is starting to wear off.
While Wall Street was hoping for a lighter tax bill and regulatory reform, Trump has instead signed executive orders focusing on immigration and more protectionist trade policy, both of which most economists have said will be economic drags.
Ray Dalio, head of the world’s biggest hedge fund, Bridgewater Associates, initially was enthusiastic about the pro-business policies under Trump, but after just a few weeks of Trump, he said in a letter to clients his opinion had shifted.
“Nationalism, protectionism and militarism increase global tensions and the risks of conflict,” Dalio’s letter said. “For these reasons, while we remain open-minded, we are increasingly concerned about the emerging policies of the Trump administration.”
According to BAML, he’s not the only one feeling this way.