US President-elect Donald Trump is unlikely to be the force of disruption that many fear, and the United States looks set to maintain its course for recovery.
These thoughts formed part of the 2017 global investment outlook, as described by DBS Group Holdings chief executive Piyush Gupta yesterday. He believes the year ahead may also herald faster than expected interest rate hikes and more uncertainty in China's external accounts.
Describing his views as "contrarian", Mr Gupta said Mr Trump's business instincts will kick in and he will not be the anti-trade demagogue that the world expects him to be.
"This is exemplified by the Cabinet he has. For the longest time, the US hasn't had such a pro-business cabinet, filled with people from deep business backgrounds, who run large companies with keen interest in driving business activities around the world," he said during a lunch event put on by DBS Private Bank at the Ritz-Carlton, Millenia Singapore.
Mr Trump will take office on Jan 20. His Cabinet, subject to Senate confirmation, includes seasoned business figures such as outgoing ExxonMobil boss Rex Tillerson and fast-food mogul Andrew Puzder.
"Another thing is, he's inheriting an economy that's actually looking very strong," Mr Gupta noted, pointing to the resilient consumption, employment, wage and housing data in recent quarters. The December non-farm payroll statistics, out last week, showed that US wages rose at the quickest pace since 2009.
"My own view is that, going into this year, the US will finally break through the shackles of the 2 per cent GDP in the last four to five years, to a growth of 2.5 to 3 per cent," he said.
But while a strong US economy will be a boon for Asia, it will firm up inflation, and therein lies the market risk as it may prompt the US Federal Reserve to speed up the interest rate hike cycle this year. Against this backdrop, DBS is bullish on Wall Street equities in the near term, with financials and banking an attractive segment. It is also bullish on the strength of the US dollar.
Asia and emerging market equities, however, may suffer from a "Trump tantrum" in the coming months, said DBS chief investment officer Lim Say Boon, referring to further capital outflow from this region as the greenback continues to gain against Asian currencies.
Mr Gupta is especially concerned over the outflow from China and the wobbling yuan, but believes the economy will largely remain steady.
"Because of the October (Communist Party) standing committee election, China can't afford to let the economy stumble, and it has enough fiscal and monetary capacity to keep the economy fairly steady," Mr Gupta said.