How US political instability could benefit London's financial sector
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Donald Trump may have upset global trade and sent markets haywire – but he could be just the man to make London great again. Fund managers at City firm JO Hambro argue that the UK stock market could start to look more attractive to overseas investors after Trump sent Wall Street stocks into a tailspin last month.
They have said the value of US-listed firms could fall further as the President's tariffs batter the American economy and put the dollar under pressure. This could be a tonic for London, where UK-listed firms have been suffering low valuations and are looking to mount a recovery.
In a note to clients JO Hambro's Clive Beagles and James Lowen argued Britain's economy now 'looks strong'. They suggested the President's actions could boost the London stock market, which is currently historically cheap. 'The key to unlocking UK market undervaluation,' they said, 'may have just been turned by an unlikely person – Trump.'
Global markets were rocked by Trump's 'Liberation Day' tariffs announced at the start of last month – though they have largely recovered. That has been helped by a deal last week between the US and China to remove painful tariffs of more than 100 per cent they had imposed on each other.
Yet in their note – published before the most recent deal – Beagles and Lowen suggested the damage had already been done. 'The consensus view that the US was the best asset class in the world has been challenged by Trump policies – whatever their final outcome – a high degree of uncertainty, a deteriorating US economy and the depreciation of the dollar,' the said.
Meanwhile, US stock market valuations had become stretched over the past two decades 'and so will take some time to unwind', they said, adding: 'In contrast, the UK economic position looks strong in a relative sense. ' Inflation will be lower than expected pre-Trump, interest rates will also be lower and growth looks better than generally perceived.'
It came as the City of London's policy chief said the Square Mile was enjoying a 'renaissance' as a 'safe haven' from global turmoil. Chris Hayward told The Mail on Sunday that jobs in London's financial sector were up a quarter on pre-Covid levels, and workers were returning after working from home during the pandemic. Reporting worldwide demand, he said: 'We can't build tall towers to house global investors' and developers' money fast enough.'
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