How brokerage giant Charles Schwab is navigating President Donald Trump, and where is best to invest

William Turvill
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President-Elect Donald Trump Holds Meetings At Trump Tower
Donald Trump was elected US President last November (Source: Getty)

Many observers of the early days of Donald Trump’s administration may feel the apparent chaos surrounding his policy-making is something new to US politics.

Liz Ann Sonders, the chief investment strategist and senior vice president of brokerage Charles Schwab, is not among them.

“Some of the perceptions about the first two months of this administration – that it’s chaos, that there’s a crazy number of executive orders, that this is unprecedented in terms of in-fighting and trying to put people in cabinet positions – it really isn’t that abnormal,” she tells City A.M. on a visit to the firm’s London office.

“This kind of messiness always happens when you transition... I think some of this has got a little bit exaggerated, that this is never-before-seen chaos within an administration, when in fact there’s always chaos within the first couple of months.”

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Pros and cons of Trump

Charles Schwab, headquartered in the US and focused on investments in America, has an estimated $2.9 trillion (£2.3 trillion) in assets under management. Sonders has worked for the firm since 2000, when it acquired her previous company, US Trust. The latest US election will undoubtedly have been one of the big challenges of Sonders’ career. How did Charles Schwab navigate the shock result?

“We were saying that we thought a Trump win would be more unsettling,” she says. “And we were somewhat careful to use that term, as opposed to: we think the market’s going to tank if Trump wins.

“And you could argue we were right for about an hour. When it was very unsettled and the US indexes went down. But then the recovery happened just as swiftly.”

With the dust settling, to an extent, Sonders has mixed feelings about the Trump administration from an investor point of view. She’s concerned about the President’s apparent stance on immigration and protectionism, but welcoming of tax and regulatory reforms. Though Sonders, who in 2005 was appointed to George Bush’s advisory panel on federal tax reform, is not hopeful of any developments soon. “Even though you can quantify tax cuts or tax reform, the likelihood of getting it done this year… is fairly low, in our opinion,” she says.

Financial stocks unloved

Primarily US-focused, Charles Schwab is underweight on utilities, telecoms and real estate investment trusts (REITs) and overweight on tech, healthcare and financials.

Why financials? “The turn, in our mind, has definitively happened,” she says.

You’ve got the Fed raising interest rates, so it’s a net interest margin for most financial companies, certainly banks. It is a deregulation story, given that financials probably were under the weight of extreme regulation more than any other industry. Health of the financial system: leverage ratios down, capital ratios very secure. And, maybe most important, an unbelievably hated and underowned and unloved sector since before the financial crisis.

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Markets may be telling the truth behind Brexit

While Sonders is focused on the US, it did not escape her attention that the UK had a notable vote of its own last year.

“It was fascinating to not only watch the Brexit vote and how quickly markets recovered after the turmoil that immediately followed it, but the whole nature of polls and the betting markets and what they do or don’t tell us,” she says.

“In terms of what the ultimate impact is going to be, I’m a markets person, and I believe often in the message that markets tell you, more so than anecdotes, or even professionals and business leaders. So I can’t help but wonder whether the market is telling everybody that things are not going to be as bad as many expect.

“Then again, the process has just begun, there’s still two years down the road, so who knows?”

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