When President Trump returned home after a 12-day five-country excursion to Asia last year, he crowed: “America’s renewed confidence and standing in the world has never been stronger than it is right now. This is exactly what the world saw: a strong, proud and confident America.”
Some saw potential for Trump’s “America First” message to stir up international relations with Asian countries in unpredictable ways — leading to questions about what makes sense in terms of investing in their fixed-income products.
Given such concerns, Bradford Long, the research director of global public markets for DiMeo Schneider & Associates of Chicago, advises: “Differentiate the rhetoric and the policy. We are going to react to the former.”
Long says he stays away from buying or selling fixed-income securities based on “a headline or a Twitter posting.” He asks a central question about government-issued debt from anywhere: “Does the country have the ability to pay me back?"
“These are the things we are thinking about so we are not caught unawares,” Long says.
Some of Trump’s rhetoric aimed at specific Asian-based companies though matters to the value of those company’s fixed-income securities, Long says.
This year, Trump’s move, based on national security concerns, to abruptly halt Singapore-based Broadcom’s proposed bid for chipmaker Qualcomm provides a good case in point.
With the decision, he sent a message that he was “willing to take extraordinary measures to promote his administration’s increasingly protectionist stance,” The New York Times reported in March, after the White House issued a presidential order citing “credible evidence” that the Broadcom proposal presented a potential threat “to impair the national security of the United States.”
Long also suggests that when evaluating Asian fixed-income securities, make sure to distinguish among the region’s nations and don’t treat Asia as one homogenous bloc.
The Chinese and Japanese governments, for instance, have distinctly different objectives that have consequences on their debt. The two countries arguably will take entirely different approaches to “normalizing” in the context of a worldwide trend of monetary policy tightening.
Meanwhile, Ross Gerber, who is the co-founder, president and chief executive of Gerber Kawasaki Wealth and Investment Management in Santa Monica, California, says he pays little attention to Trump’s utterances and Tweets about world trade dominance.
“I don’t think it matters about Trump and America First. All the real growth is in Asia, and the economies there will grow much quicker than in United States over time,” Gerber says.
“Trump is trying to get better deals for America, but that doesn’t hurt Asia per se. It actually makes it a more competitive and better economic environment for all,” Gerber says.
This story is part of a 30-30 series on evaluating fixed-income opportunities when rates are rising.