Quilter’s WealthSelect Managed Portfolio Service has used its latest quarterly rebalance to increase its equity allocation to the United States following the re-election of Donald Trump, moving its managed portfolios to an overweight position relative to the strategic asset allocation.
The WealthSelect portfolio managers have maintained their generally cautious stance. However, they anticipate that president-elect Donald Trump’s campaign pledges of corporate tax cuts and deregulation will benefit US-based businesses and provide a near term boost to the US economy.
The team expects sectors such as financials and industrials to be the primary beneficiaries and have added exposure outside of the Magnificent 7 to reflect this.
The increased allocation has been primarily directed towards Quilter Investors US Equity Income within the Managed portfolios, Quaero Capital Cullen US ESG Value within Responsible, and AB Global Sustainable Opportunities within Sustainable. This increased equity allocation has been funded by cash, fixed income and alternatives, depending on the risk level and portfolio range.
Elsewhere, the WealthSelect team opted to marginally reduce the European equity allocation within the Managed and Responsible portfolios. Europe appears vulnerable in the wake of Trump’s tariffs, which could exacerbate existing regional issues.
The team also reduced the UK equity allocation within the same portfolios, believing that while the UK might be more shielded from trade headwinds than the rest of Europe, the Labour government’s first budget has underwhelmed investors. This is expected to create growth challenges and may deter overseas investors from seeking valuation opportunities in UK equity markets.
The team also reassessed the allocation to government bonds within the portfolios. The team concluded that while bond yields have backed up since their previous rebalance, the underlying policy mix of the new Trump administration is expected to prove inflationary.
This increases the risk that the Federal Reserve will need to delay rate cuts. With this in mind, the team have adjusted the government bond mix within the portfolios, with a small increase in gilts given the expectation for weaker growth in the UK.
Within the Responsible portfolios, a new holding in PZENA Emerging Market Value was added, providing value exposure within the emerging markets manager mix. The team have also undertaken a review of the Asian equity holdings. This has led to a switch from T. Rowe Price Responsible Asia ex Japan Equity to the Veritas Asian fund. The Veritas fund has been on the radar since launch of the Responsible portfolios and, following the latest review, is now the higher conviction name within the space.
Helen Bradshaw, portfolio manager at Quilter Investors, said: “Donald Trump’s victory has shifted the outlook for markets as we move into the new year. As we draw closer to the start of his second term in office, we have used this latest rebalance to ensure the portfolios are adjusted to weather this change of landscape.
“The impact of Trump’s tariffs will be felt globally. In the US, we will likely see a shorter-term economic sugar rush as his promises of corporate tax cuts and deregulation provide a boost to corporate America, and we have increased our exposure outside of the Magnificent 7 to reflect this.
“Comparatively, Europe is likely to suffer the effects, and when combined with the economic challenges the region is already facing, it looks rather vulnerable. The UK might not feel the tariff pinch quite so keenly, but it faces its own headwinds following an underwhelming budget and a lack of investor interest. Now felt like the right time to reduce our equity allocation in each of these regions.
“2025 looks set to be another interesting year. We will be keeping a particularly close eye on what policies the Trump administration is able to push through and how this reverberates across markets.”
