Tags: jim mccaughan | trump | brexit | market threat

Trump Backers, Brexit Voters Pose Market Threat: Jim McCaughan

Image: Trump Backers, Brexit Voters Pose Market Threat: Jim McCaughan
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Thursday, 26 May 2016 02:19 PM

Jim McCaughan, who oversees more than $350 billion as chief executive officer of Principal Global Investors, likened Donald Trump’s supporters in the U.S. to voters who want Britain to exit the European Union, and said both groups pose a threat to global markets.

“There’s a big trans-Atlantic resonance here, because the people who vote for Brexit are very similar to the people for Trump,” McCaughan said Thursday in an interview with Bloomberg Radio. “You could have a situation where you get Brexit and President Trump, and both sides of the Atlantic suddenly shut down free trade. That, I think, would be very bad. And if that’s the prospect, I think markets could definitely suffer.”

Voters in Britain are gearing up to decide next month whether to leave the union, and officials including Bank of England Governor Mark Carney have warned of the economic risks from departing. A vote for Brexit could add costs to international trade, make Britain less attractive for foreign investors and lead to an output loss, the Institute for Fiscal Studies, a non-partisan group, said in a report Wednesday. Those concerns have been dismissed by Brexit supporters who say Britain would see stronger growth and lower immigration.

“The second half of the year, if they go for exit, would see a lot of uncertainty about how trade is organized,” McCaughan said.

‘Bad for Business’

McCaughan, who was born in Scotland and holds a degree from the University of Cambridge, said Britain has a centuries-long tradition of engagement with the rest of the world and estimated a 70 percent chance that voters will reject a Brexit. He worked for European firms including Credit Suisse Group AG before joining Des Moines, Iowa-based Principal Financial Group Inc. more than a decade ago.

He said it’s hard to know based on Trump’s statements how the Republican would manage the economy if elected president.

“He is pragmatic, that’s the positive,” McCaughan said of the real estate mogul, who has faulted trade deals and immigration for hurting the middle class. “He’s said some things that would be very bad for business if enacted, that’s the negative.”

One approach for investors could be to guard against the possibility of lower-than-expected economic growth by sticking with safe assets, he said.

“Maybe before a Trump administration starts borrowing a lot, you at least stick with the Treasury market and high-quality bonds,” he said.

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Jim McCaughan, who oversees more than $350 billion as chief executive officer of Principal Global Investors, likened Donald Trump's supporters in the U.S. to voters who want Britain to exit the European Union, and said both groups pose a threat to global markets.
jim mccaughan, trump, brexit, market threat
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2016-19-26
Thursday, 26 May 2016 02:19 PM
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