22nd November 2024
Trump election victory casts shadow over local markets
Key points are as follows:
- While a convincing Trump US Presidential Election victory buoyed US equities in November, it cast a shadow over non-US markets, especially Hong Kong and China equities, resulting in a likely 2nd consecutive monthly loss for the MPF system. MPF Ratings’ MPFR All Fund Performance Index (as at 19th of November) shows an estimated -0.38% month-to-date fall however year-to-date gains remain strongly positive, up 9.15%, for a best first 11 calendar month performance since 2017. (See Table 1)
- In absolute dollar terms, November’s estimated month-to-date investment loss is equivalent to roughly -$7.1bn (or -$1,500 per MPF’s 4.75m members) reducing its year-to-date gain to $104.0bn (or $21,900 per member).
- On the back of the US election result, US equities is the best performing fund category month-to-date (3.93%), followed by Global equities (1.95%) and DIS Core Accumulation Fund (1.20%) both of which have a bias to US equities in their asset allocations.
- While US markets reacted positively to Trump’s victory, concerns over possible US tariffs and other trade restrictions are impacting other markets. MPF’s November losses are being led by Hong Kong and China equities and European equities, however, despite being the 2nd worst performing asset class month-to-date with a return of -2.82%, Hong Kong and China equities remains the 4th best performing asset class year-to-date, with a return of 14.63%.
- As a result of November’s expected monthly loss, MPF Ratings expects MPF’s total asset size to end at $1.287tr, the 3rd highest level since MPF’s launch, down $4.5bn from October but up $146.4bn year-to-date, while average member account balances are expected to fall to $270,700, down $900 from October but up $30,800 year-to-date.
Francis Chung (叢川普), Chairman of MPF Ratings Ltd, Hong Kong’s independent provider of MPF research, views and education noted that MPF’s November results are likely to be affected by the US Presidential election result. While US equities immediately rallied after Trump’s victory, hence the “Trump Bump” moniker, concerns over possible US tariffs and other trade restrictions immediately cast a shadow over other markets, notably Hong Kong and China, and European markets, the result of which could be a modest MPF November investment loss of -0.38%. Such a result would see MPF’s total asset size slip from $1.292tr to $1.287tr while average MPF account balances would fall $900 to $270,700 per MPF’s 4.75m members. Despite this the system is still producing its best year-to-date return since 2017 and Mr Chung believes it is still possible for the system to deliver record asset sizes and account balances by the end of this year.
Despite a possible November return setback, MPF Ratings believes it is still possible for the MPF system to deliver record asset and account balances by the end of 2024.
“Despite a possible November return setback, MPF Ratings believes it is still possible for the MPF system to deliver record asset and account balances by year’s end. If the system has a solid December performance result, MPF’s total asset size could exceed its previously recorded high of $1.327tr.”
US election result is good for US equities, not so good for local and European markets.
“MPF’s US equity funds have produced positive returns, consistent with the ‘Trump Bump’ which saw US equities rally immediately after Trump’s presidential election victory. Conversely, concerns over possible US tariffs and other trade restrictions immediately cast a shadow over other markets, notably Hong Kong and China, and European equities.”
Outlook – DIS funds’ consistency highlights that ‘staying the course’ and diversification is key to MPF ending 2024 at record levels
“Markets could be as unpredictable as the President-Elect himself as focus shifts to Donald Trump’s 2nd Presidential Inauguration in January 2025. The key to MPF ending 2024 at record levels is for members to be diversified and ‘stay the course’. The success of such a strategy is evidenced by the MPFA’s mandated Default Investment Strategy (DIS) funds’ consistent performance. A combination of low fees, diversified investing, and an automatic risk reduction mechanism removes the temptation for short term trading and ensures that members focus on their investment goals.”
Table 1: MPF Ratings’ MPFR Index returns by asset class (as at 19th November 2024)
Source: MPF Ratings
