Neil Woodford believes Donald Trump’s more extreme political views would temper should he win the US presidency, an outcome that would have limited impact on the US economy.
In a live Q&A hosted by Woodford Investment Management on Monday (14 March), the manager said his rise in popularity was due in part to the ongoing economic difficulties faced by many developing countries.
He says: “Socioeconomic groups that have not benefited from the recovery of the US economy since the financial crisis feel marginalised and are showing an increasing preference for ‘outsider’ politicians, like Bernie Sanders and Donald Trump.”
Woodford believes if he were to win, Trump’s more controversial views would calm down.
“In addition, the checks and balances in the US political system would clearly make some of his more extreme policy choices unlikely to prevail. My conclusion is that if he were elected, it would have a very limited impact on the US economy.
Woodford also defended the share price underperformance of Woodford Patient Capital Trust since the start of the year, remaining confident in the fundamentals of his portfolio.
The share price has fallen 11.5 per cent over the three months to 11 March, according to FE, while in NAV terms the portfolio was down 7.2 per cent. This compares with the UK All Companies peer group’s decline of 5.3 per cent.
Woodford blamed the poor performance to the sell-off in shares across healthcare, biotech and early-stage quoted stocks in the UK and the US.
He says much of that trading was the result of “short-term positioning and rotational activity across the fund management community”.
Woodford says: “We don’t believe that it is driven by a correction of overvaluation, nor by a deterioration in fundamentals.
“We remain very pleased with the underlying progress of the businesses in which we have invested in the trust.”
He reminds investors the vehicle has always been designed with a long-term view in mind and while he hopes to deliver good short-term performance, he believes he should be judged over a three-to-five year view.
Elsewhere, China is becoming more prominent a concern for the fund manager.
Asked about Black Swan events, Woodford says his biggest worry is “a more violent implosion of the Chinese credit bubble” than he was currently expecting.
He says with the global economic backdrop becoming more challenging in the face of greater political uncertainty, especially with China becoming more of a threat, investor sentiment is falling off.
That backdrop – in spite of the correction having started – is creating potential buying opportunities, which Woodford says would prompt him to add to certain holdings, especially in healthcare.