Brexit Scarier Than Trump for $51 Billion Bond Fund Manager

(Bloomberg) -- Donald Trump as U.S. president will shake global markets less than Brexit did.

A victory for Trump may only create short-term volatility since the impact of the election has been analyzed to a greater extent by the markets, according to Dagfin Norum, chief investment officer fixed income and investment strategy at Storebrand Asset Management in Oslo.

“There will initially be noise and then markets will gradually calm down,” he said in an interview in Oslo on Thursday. “We don't think the effects of that are so big that it will lead to a global or U.S. recession.”

For now, markets are mostly reflecting fear. Over the past week, global stocks fell the most since before Britain's June vote to leave the European Union as opinion polls showed a dwindling lead for Democratic presidential candidate Hillary Clinton. The race has tightened since the FBI announced it was once again looking into more of Clinton's e-mails.

While a Trump win on Nov. 8 could lead to more protectionism and reduced growth, the question is how much he will be able to implement, said Norum, who oversees 420 billion kroner ($51 billion). Storebrand's view is that Clinton will win, making the election a non-event.

The 50-year-old investor supervises tactical asset allocation at the life insurer. Tactical mandates were reduced to neutral in stocks before the U.K. Brexit vote. His bond portfolios are overweight credit, or holding more in corporate debt than the indexes they're measured against. The portfolio is also underweight duration, meaning it stands to outperform, comparatively, when rates rise.

“If we compare credit in the U.S. and Europe we have a slight preference for the U.S. because you get a bigger pick up,” he said.

While there's still some upside in credit, the bottom in interest rates is probably behind us, Norum said.

The big risk now is in how central banks move and communicate as they get closer to raising rates. Any moves must be gradual because markets won't withstand rapid shocks, he said.

“It's hard to see that happen without any market impact,” Norum said. “You must be prepared be for more volatility going forward.”

To contact the reporter on this story: Jonas Cho Walsgard in Oslo at jchowalsgard@bloomberg.net. To contact the editors responsible for this story: Veronica Ek at vek@bloomberg.net, Jonas Bergman, Tasneem Hanfi Brögger