Uptick in Active Management Nigh01.19.2017
New administrations mean new economic policies and Wall Street expects an upswing in active management under the new Trump administration, according to a post-election online survey conducted by industry research firm Tabb Group.
Almost all survey participants (89%) believe that the plans advocated by President Trump and his prospective cabinet will increase in market volatility while weakening global financial stability (65%), Tabb Founder and Research Chairman Larry Tabb told the Sefcon VII audience in Midtown Manhattan.
Approximately three out of four survey respondents expect the administration to repeal the Dodd-Frank Act.
“Even if Trump does nothing to roll back Dodd-Frank, there is going to be significant changes in regulations,” said Tabb.
He predicts that the Trump administration will pivot from the previous administration’s quantitative-easing strategies to a more tactical use of capital. “It will completely change how the markets have operated since the financial crisis, where it was all about quantitative easing and low rates,” said Tabb. “We’re going to move back to tactical allocations, and this is going to be really good for the active management community.”
Close to two-thirds (64%) of the survey respondents agree with his analysis while the greatest plurality (42%) do not believe that the new environment will affect passive investment strategies. Of the remaining respondents, 36% think it will have an adverse impact on passive investment strategies while 22% say it will have a positive effect.
The overwhelming beneficiaries of the new economic environment will be the banks (81%), according to respondents. They also believe that hedge funds, investors, and the buy side will benefit to a lesser extent, 62%, 59%, and 57% respectively.
Wall Street expects that the equities (65%), energy (63%), and metal (61%) markets will benefit from the assumed Federal rollbacks in corporate, financial, and environmental regulations. However, the industry expects that the same policies will adversely affect the rates (54%) and credit (53%) markets. “There are going to be winners and losers,” said Tabb.