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Trump's effect on UK special relationship

This article is part of
Guide to President Trump's impact on investments

Defined benefit (DB) pension schemes have been beneficiaries of rising bond rates and may continue to do so if Mr Trump's policies are put into effect with little push-back from the Senate or Congress.

According to analysis by Hymans Robertson's funding position monitor, 3DAnalytics, DB funding levels rose £35bn on the back of Mr Trump's policy pledges.

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The total UK DB deficit fell from a record high of more than £1trn in August to £825bn as at 16 November.

Calum Cooper, partner at Hymans Robertson, says the deficit reduction "has been driven by rising bond yields in part due to revived inflation expectations due to President-elect Donald Trump's policy pledges".

These growth-centric pledges, together with what Mr Cooper refers to as "Trumpflation" may also spell the end for forced bond and inflation manipulation by central bankers. 

Richard Buxton, head of UK equities for Old Mutual Global Investors, explains: "This is the high watermark of central bankers. From here, they will decline from being financial gods to being officials, public servants of the greater good.

"Negative interest rates, negative bond yields, central bank purchases of corporate bonds at yields well below those of the same company's equity yield - this has been the Alice in Wonderland central banking.

"A return to positive interest rates, positive yields, an incentive for savers to save and to creating a real cost of capital for entrepreneurs will all be hugely positive consequences of this electoral revolution."

Other UK assets

Sterling received a much-needed boost from Mr Trump's victory, after a damaging 2016 in which the pound's value dropped to a 168-year low, a fall exacerbated by the European Union referendum, talk of Hard Brexit and an uncertain political environment.

On the day the US election result was announced, the pound was trading at 1.2418 against the US dollar. By 16 November it was up slightly at 1.2439

Property has also received an unexpected filip.

There had been concerns says Jeremy Leaf, London estate agent and former chairman of the Royal Institution of Chartered Surveyors, that the Trump Presidency would "inevitably have an impact on confidence".

He says: "We are likely to see a further period of uncertainty because he will not be able to take any decisive action until he assumes power in mid-January. 

"That is a concern - a further period of limbo after until action is taken and in that time markets are likely to remain in uncertain territory. This is particularly problematic as it comes on the back of 18 months of limbo when the election result had been too close to call."