Discussing the new world order and the role of the US, AMP deputy chief economist Mousina, debated the role of the Trump administration on investment markets.
“Part of this new world order is the decline of the structural significance of the US and in the US dollar, we can see this massive underperformance the US has had this year,” she told the Financial Advice Association Australia (FAAA) annual congress in Perth.
“There is a view that the US is no longer going to be exceptional, it has lost its influence as a global power and removed itself from global institutions and the push around tariffs by the Republican party means the US is likely to underperform in the long term.”
Over the 12 months to 20 November, the S&P 500 has returned 12 per cent while the Nasdaq has returned 18.8 per cent.
But rather than attribute that to US President Donald Trump and his legislative policies, she said the cause is the rising dominance of China.
“I’m a bit sympathetic to that view but I don’t think it’s to do with Trump, it’s about the rise of China in the last decade and that will continue. It’s not just about trade and tariffs, it’s about the loss of US influence around the world and that’s going to be a long-term story.
“China is a major global power and its significance in the global economy will continue to grow which has large implications for investors’ portfolios for years to come, it won’t be a short-term trend. Over a 20-year period, US equities will underperform against emerging markets and Australia.”
While Mousina is sceptical on a long-term basis, AMP is still positioned for them to outperform in the short term.
She believes US equities could still have 7-8 per cent returns next year, maybe even getting into double-digits of 10 per cent.
“We are still positioned for the US to outperform because of the upside from technology and the huge domination there. My personal view is the tech sector still has further to go in terms of earnings growth.”
