US protectionism puts corporate profits at risk

funds-management/Lazard-Asset-Management/Lazard/USA/Trump-Administration/

8 October 2018
| By Oksana Patron |
image
image
expand image

The sustained move towards protectionism initiated by the Trump administration can further derail economic growth, leaving corporate profits in the US even more at risk than GDP, according to Lazard Asset Management.

The company’s co-head of multi-asset and head of US equities, Ronald Temple, stressed that understanding how a business and its competitors were exposed to that risk was critical to evaluating the potential impact of protectionism on profits.

“As a result, protectionist policies will likely be even more meaningful for corporate profits and markets than for the economy. Many companies also have significant overseas revenues and assets which could be exposed,” he said.

“The combination of US protectionism and Fed monetary policy tightening could trigger the next

bear market in equities and perhaps even the next economic recession.”

However, according to Temple, some US companies could actually become potential beneficiaries and this would include the following companies:

  • Those that operate in protected industries,
  • Those that have domestic supply chains,
  • Those who have primarily domestic sales,
  • Those that sell products for which customers are less sensitive to price.

According to Lazard AM, it was important for investors to assess what was potentially exposed and how at a company level.

“Doing so is difficult, due both to the globalisation of business and supply chains and to inadequate disclosures at the company level. However, understanding these exposures, as well as competitive positioning, is critical to evaluating risks and rewards and positioning portfolios appropriately,” Temple said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months 3 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months 4 weeks ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

5 months ago

ASIC has suspended the Australian Financial Services Licence of a Melbourne-based financial advice firm....

1 week 6 days ago

The corporate regulator has issued infringement notices to three AFSLs whose financial advisers provided personal advice to a retail client while unregistered....

2 weeks 4 days ago

ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test....

3 weeks 2 days ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND