As Trump amps ups rhetoric, Jim O'Neill turns positive on EMs Valuation-wise,

 Jim O'Neill believe the US market is no longer cheap. "Emerging markets look more interesting than developed markets." | Jim O'Neill (more) Former Chairman, Goldman Sachs | Equity markets, especially in the United States, have been on a tear ever since Donald Trump was elected President, with the Dow Jones index recently taking out the 20,000 level for the first time ever. But despite Trump’s perceived pro-business image and self-dubbed “America-first” policies, economists are concerned whether his protectionist stance may be bad for global growth. Overnight, tensions between the US and Mexico arose after the Trump indicated he was firm in following through with his election promise to build a border wall between the two countries.

 That was worried many, including former Goldman Sachs Chairman Jim O’Neill, who says he is surprised that Trump is following up on what many believed was mere campaign rhetoric. A lot of Trump’s policies stem from his tapping into a rising Western middle class ire against globalization, which they believe has impoverished them at the cost of those in emerging economies. But O’Neill, a believer in globalization and who rose to fame as an analyst after coining the BRIC (Brazil, Russia, India, China) acronym fifteen years ago, says he “does not understand why Trump is doing this”. “Trump and his advisors are assuming that American leadership in the world is the same as it was 25-30 years ago, which is not the case,” O’Neill told . 

“Today, China has become nearly as important as the US in all aspects of global trade.” The world’s second largest economy after the US is not just an exporter but also a leading importer for about 70 countries, he pointed out. “And so many countries can carry out having free trade, just not with the United States,” he said, adding that Trump’s moves will also not be good for the US itself, as it will reduce its interconnection with the rest of the world. “I don’t think Trump is getting good economic advice,” he said. Positive on emerging markets However, in what reinforces his view that the US is not the sole economy that underlines that health of the global economy, O’Neill says world growth continues to remain strong. “We’re entering 2017 with the world economy expected to grow closer to 4 percent than 3 percent – the best it has been for years,” he said. 

This, he said, means commodities such as crude oil are likely to continue to rally – a move that may benefit a lot of resource-rich emerging economies. The former Goldman strategist is also positive on India over the medium term, and said that while the effects of demonetization may play out in the near term, economic growth could inch up to 8 percent shortly thereafter. “That kind of policy move is quite good for the medium term and gives me hope India will undertake more serious reform in future.” He maintained that the Union Budget is not that important now for the market, except to drive short-term moves. “I am more interested in where PM Modi is taking the country through effective reform steps to attract more foreign investment,” he said. Valuation-wise, he said the US market is no longer cheap. "Emerging markets look more interesting than developed markets.

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