The investors and executives who throng Davos every January are many things. But above all, they’re rich. And they’re starting to see plenty of opportunities to stay that way under Donald Trump.
At coffee bars and cocktail parties in the Swiss town, which hosts the World Economic Forum’s annual meeting this week, conversation has often turned to how money can be made from the rise of a populist firebrand. Amid all the panel-talk of reducing inequality and re-invigorating the middle class, the Davos set is hard at work looking for ways to safeguard and expand its wealth even as anti-establishment movements roil global politics.
That means enjoying the benefits of a Trump-driven boom in the U.S., where the business world is celebrating his pledges to slash taxes and loosen regulations. Stock markets have surged to near record highs, and banks like Goldman Sachs Group Inc. and Citigroup Inc. have reported strong earnings.
“If you look at what’s happened to U.S. bank stocks in the last six weeks, they’re up 30 percent,” said Huw Jenkins, the vice-chairman of Sao Paulo-based lender Grupo BTG Pactual. “The U.S. looks like it’s a great place to invest right now.
Willing Capital
Optimism about money-making opportunities under the Trump administration goes well beyond the markets.
The real estate mogul is stocking his cabinet with finance-friendly figures like billionaire investor Wilbur Ross and former Exxon Mobil Corp. chief Rex Tillerson. And Trump’s promise to reinvigorate infrastructure spending, with the co-operation of a Republican-dominated Congress that will be eager to involve private firms, opens potentially huge business opportunities.
China Investment Corp., the country’s $814 billion sovereign wealth fund, is “actively” seeking opportunities in U.S. infrastructure and manufacturing, its vice-president said in Davos on Wednesday. Spanish utility Iberdrola SA would be “delighted” to invest in new energy infrastructure in the U.S. if Trump makes it a priority, CEO Ignacio Galan told Bloomberg Television on Thursday.
“The capacity for infrastructure funded by government is basically limited by the size of the deficit,” said Bank of Montreal CEO Bill Downe, whose company is a major underwriter of port and road projects. “There’s a lot of private capital willing to do that.”
The sudden embrace of Trump in Davos is jarring in its contrast with what many of its attendees said about him before. The overwhelming majority supported either his Democratic opponent, Hillary Clinton, or more mainstream Republican candidates, many on the grounds that they viewed the real estate mogul as dangerously volatile.
‘Responsive Leadership’
Former U.S. Treasury Secretary Larry Summers said he’s "very troubled" by the turnaround, and the possibility it will "enable whatever the instinct of this new administration is." Business leaders who "two, three months ago were saying he was a man they’d never do business with are now hailing him as a great economic statesman," he said in a Bloomberg Television interview.
The capitalists at Davos are trying hard to sound sober this year. The official theme is “Responsive and Responsible Leadership,” and attendees keep pledging to heed the lessons of Trump’s victory as well as the U.K.’s surprise Brexit vote. Still, there’s little sense that the Magic Mountain has been humbled.
On Wednesday an A-list crowd packed the famed Belvedere Hotel late into the night. Ousted U.K. Prime Minister David Cameron appeared at a dinner hosted by Pricewaterhouse Coopers, and the dance floor was jammed at an annual party thrown by McKinsey & Co., with guests sporting hot pink glasses handed out for the occasion. JPMorgan Chase & Co. CEO Jamie Dimon held court at the bar.
Finance Barons
Few seem more confident in their ability to profit from Trump’s rise than the barons of finance. Fixed-income trading, the traditional engine of Wall Street booms, is up sharply. JPMorgan’s shares have gained 19 percent since the election; Goldman’s fourth-quarter earnings tripled from a year earlier.
Some traders have more esoteric ideas about how to squeeze the last dollar out of the Trump rally. One possibility: riding the swings caused by his pronouncements on pending mergers like AT&T Inc.’s $85 billion purchase of Time Warner Inc.
“He’s pontificated a lot on what deals he thinks should go through and should not go through,” Canyon Capital Advisers co-CEO Mitch Julis told Bloomberg Television. “So arb spreads are one area where you can actually lay bets,” he said, referring to trades that exploit the gap between offer prices and the current value of shares. “And we have.”
However rosy the immediate future looks for the Davos crowd, an undercurrent of unease about Trump is never hard to detect here — even among those who say they’re optimistic.
Trump is unpredictable. He railed against “elites” during his campaign. He’s suggested that hedge-fund managers are “getting away with murder” thanks to the so-called carried interest tax break for their earnings. And he’s threatened to tear up longstanding trade and security arrangements that are almost sacrosanct in Davos — raising the worst-case scenario of a confrontation with China that would rupture the world’s most important economic relationship.
“There’s this wall of geopolitical risk in the world,” said Michael Sabia, the CEO of Caisse de Depot et Placement du Quebec, a $191 billion pension fund. “These tails of risk, whether they’re protectionism risk or pure geopolitical risks, these are fat tails. If they happen, they’re huge.”
This article was provided by Bloomberg News.
