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Investing in the Trump era: Piedmont investment and advisors' ISAAC Green shares the best strategies to maximize returns.

WHAT WILL DONALD TRUMP'S PRESIDENCY MEAN FOR investors? Experts agree that there will be some uncertainty until a clearer picture emerges of how Trump's economic policies will play out over the next four years. "Still, there may be some opportunities," says Isaac Green, CEO and chief investment officer at Piedmont Investment Advisors (No. 5 on the be asset managers list, with $5.6 billion in assets under management).

Green points to four key markers as post-election drivers: taxes, regulation, infrastructure spending, and reflation. "If President Trump's agenda is carried through, we believe the new period will be characterized by decreasing globalization and free trade; stimulative fiscal policies; and increased U.S. growth, higher inflation, and rising bond yields," he says.

Green adds that tax reforms--which could bring more competitive corporate rates, overseas cash repatriation, and a simplified personal tax code--could provide a boost to the economy. Investors are expecting an easing of regulatory burdens and a more business-friendly operating environment, something Green views as being advantageous to some sectors. Further, he notes that Trump's proposed across-the-board tax cut should benefit equities over bonds.

Sectors that Green believes could benefit from Tramp's presidency include:

* Banks and other financial institutions: These are poised to benefit from a strong economy with higher, short-term interest rates and faster loan growth; an expected scale-back of post-financial crisis regulation; and lower corporate tax rates.

* Infrastructure: Public spending on infrastructure as a share of GDP is near all-time lows. However, Trump has pledged to improve these conditions over the next decade, by introducing legislation that will ultimately encourage $1 trillion in infrastructure investments. Green suggests that infrastructure spending could spur growth in engineering and construction; commodities, such as steel, copper, cement, asphalt, and crushed aggregates; and industrial machinery.

* Defense companies: Such firms can also gain a huge boost from the Trump administration's and the Republican-led Congress' plans to meaningfully boost the defense budget.

* Domestic energy: Supported by fossil fuel development--including domestic drilling and fracking--producers in this sector can perform extremely well. Green maintains that Trump promised an industrial revolution driven by an anti-regulatory environment that's heavily focused on traditional energy sources. Moreover, the administration plans to roll back policies such as federal tax credits that favor solar power, wind energy, and other renewables.

* Technology companies: Those in this sector with a significant amount of cash on their balance sheet can benefit from the relaxation of cash repatriation levels.

More broadly, Green is positioning his Durham, North Carolina-based firm to harness the pro-business climate and leverage the uptick in the domestic economy. He also maintains, however, that a cautious approach may prove best. "Policy uncertainty, trade wars, and protectionism remain the key risks. The potential for aggressive Fed tightening in response to higher inflation can introduce volatility in the markets," he says.

A few weeks into the new presidential term, all this remains highly speculative. As Green notes, "The politics of getting things done in Washington can be an overhang on the implementation timeline for any new president's agenda. For that reason, we think the best way to invest remains much the same as always: through high-quality, profitable companies with growing dividends that have above-average exposure to cash-flow growth."

EDITED BY DEREK T. DINGLE @DTDINGLE

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Title Annotation:MONEY
Author:McKinney, Jeffrey
Publication:Black Enterprise
Geographic Code:1USA
Date:Jan 1, 2017
Words:969
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