As Clinton edges closer, infrastructure and healthcare come into focus

Seilern Investment Management chief investment officer Raphaël Pitoun says the past week’s developments in the US presidential race suggest investors now face a higher likelihood of a Clinton win, with implications for the infrastructure and healthcare sectors in particular.

Pitoun (pictured), who is fund manager for the Stryx World Growth and America funds at Seilern, said that following the ‘tape-gate’ that erupted around candidate Donald Trump in the past week has made him more certain of a win by Hillary Clinton.

With that certainty comes an equally important question about whether she could also carry Congress through the other elections also taking place. If that were to happen, then she would have much more room to manoeuvre in terms of her stated plans.

Pitoun suggests that there are three key elements to watch for following a Clinton win.

The first is around her stated infrastructure plans. Combined infrastructure spending along with plans for developing some sort of infrastructure seeding vehicle could result in up to $500bn of expenditure, some 2%-3% of US GDP. Given that infrastructure investments tend to have a multiplier effect, this is described as “quite interesting” by Pitoun.

The second key change could come in healthcare. Providers of healthcare in the US have been under pressure recently, for example, over the pricing policies of Mylan, which produces a device for delivering epinephrine to people suffering anaphylaxis, or acute allergy. Pitoun notes that Clinton has proposed significant changes to the way the US healthcare system works, for example, in respect of how drugs are bought through the Medicare system. That could hit the margins of drug makers. But there could also be implications for listed health insurers that investors need to understand, he warns.

The third key area that Clinton has raised is inequality along with proposals to reform the country’s tax code. That would be difficult to implement Pitoun says.

Still, he adds: “The likelihood of all these three happening is rising by the day, given the problems of Trump and the fact the Republican Party is in complete disarray.”


From the perspective of a UK investor in US assets there is a currency risk that has risen in the wake of the Brexit vote and recent weaknesses in the currency.

Pitoun suggests that sterling may have taken on the role previously held by the yen, of being a ‘sounding currency’ for currency traders. If that switch has indeed taken place, then the pound could head much lower, because trading will make much less reference to the fundamentals of the UK economy.

That said, US equities still look cheap on a relative valuation basis, Pitoun argues – barring any shock, such as an unexpected recession.

This ‘cheapness’ is also a relative call to the fixed income market, while those who rely on metrics such as the Shiller CAPE will miss out on a “great opportunity to make money”.

Generally, too many investment professionals are into cash at the moment, which is arguably a greater risk, Pitoun adds.

“This is a big risk when you look at the level of cash among peer portfolios, hedge funds, multi-asset allocators; the level of cash is much too high.”

“It’s common thinking, but people talk about the most hated bull market from an investor point of view. Sentiment is low, people are expecting a ‘bomb’, such as a US recession, political trouble in Europe, failed policy in china. But when you look at liquidity and global growth it’s not that bad at all.”

“There is still potential for the equity market, and it is not that expensive. The S&P is around 20x p/e, with earnings yield at about 5% against 1.7% for US 10-year Treasuries. So, unless you think there is going to be something recessionary, then things look good.”

Trade woes

There has been discussion around the possibility that either of the main candidates for the US presidency could lead to more trade protectionism. And the IMF recently warned about protectionist tendencies in regards to threats to global growth.
But Pitoun says of the companies he looks at “for 99% it’s not a problem”.

He notes one exception in the form of Mastercard in Russia. Legislation, described as protectionist, there forced the company through its local joint venture to build a new way to process payments in Russia, he says.

In terms of Brexit it generally seems a benign situation, barring, for example, a breakdown in passporting. But it could create issues “down the road”. For example, the European Medicines Agency may need to relocate to the EU from London, and require a new one to be created just for the UK market. That will create extra costs for companies, Pitoun warns.

However, overall he sees currently little effect at the micro level of protectionism, noting that it does not seem to be preventing people from doing business.


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