Richard Buxton: Trump could free us from the orthodoxy of central banks

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Donald Trump’s presidency might not be all doom and gloom for Old Mutual Global Investors’ Richard Buxton as it could bring “a sea-change” in global economic and monetary policy.

Buxton, head of UK equities, says despite the “scary” outlook which could see Trump negatively affecting the globalisation of trade, his victory could potentially halt central banks’ increasing power of the past few years.

“This is the end to the Washington consensus, to the era of ‘Davos Man’, to the belief that an elite knows best how to manage the global economy,” Buxton says.

“This is the high watermark of central bankers. From here, they will gently decline from being financial gods – arguably more powerful even than elected politicians, markets trembling on their every word – to officials, public servants of the common good.

“For those of us who believe that central bankers have led us up a blind alley, this can only be good news. 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 is Alice in Wonderland central banking.”

Buxton says a return to positive interest rates as well as positive yields and the incentive for savers to save will be “hugely positive consequences of this electoral revolution”.

He says: “Media reaction when Reagan was elected President was alarmist. He was widely deemed a warmongering failed actor, with no credible prospects in government. He faced down the USSR, created supply side reforms which ushered in an era of prosperity for the US and elsewhere – and died a much-loved national hero.

“I am not forecasting the latter for President Trump, but I do think commentators will be surprised by how positive his revolution will be for the US – and global – economy.”