Ken Griffin, founder of hedge-fund group Citadel, is upbeat about US president Donald Trump’s economic policies. He likes the fact that Trump’s administration has “stopped the growth of regulation”, which should help US entrepreneurs. He also likes the idea of cutting corporate tax rates to make US firms more competitive with their foreign rivals. He even likes the more aggressive stance on trade: “American firms have been on the short side of too many trade deals”.
So what should we be investing in? “Go where the most disruptive change is taking place.” An obvious candidate is retail, with the rise of e-commerce. He also thinks that machine learning, big data and artificial intelligence will transform manufacturing. Overall, the companies that should do best in the medium term are “global technology companies like Google and Facebook”.
One issue that does concern Griffin is a possible surge in inflation. While many have feared that monetary easing would lead to inflation, until now such forces have been kept in check by a slack labour market. However, with unemployment at around 4%, the labour market is now relatively tight, while many states and cities have recently raised minimum wages.
This could drive prices higher, which in turn could drastically curtail the Federal Reserve’s ability to deal with a recession, which could be bad news for markets – today’s historically low volatility in bond, currency and equity markets is due in part to continued monetary easing. While the US “is not quite at the end of the current business cycle”, we are “much closer to that moment in time” than many people imagine.