US three arrows policy has echoes of the Reagan Plaza Accord. That’s good news for ASX investors. Head investment specialist James Holt explains.
- Deregulation, pro-growth policies
- ASX companies to benefit
- Find out more about Perpetual’s Australian share funds
Amid all the noise and nonsense surrounding Donald Trump, many investors are missing the real story – his administration is driving a wave of global deregulation that could fuel a new phase of world economic growth.
The ‘three arrows’ strategy in the US – modelled on the economic blueprint of Japan’s Shinzo Abe – aims to slash regulation, cut the budget deficit, and drive energy costs lower, says Perpetual’s James Holt.
Holt argues that all three are bullish for global markets and could deliver solid returns for Australian companies exposed to global growth, particularly in resources.
“Treasury Secretary Scott Bessent has outlined goals for ‘three 3s’ – the first is to massively pursue deregulation with the aim of boosting growth to 3 per cent per annum," says Holt.
"The second is to cut the deficit from 7 per cent to 3 per cent of GDP. The third is to boost energy production by 3 million barrels a day.
“The aim of all this is to speed up growth, to reduce the debt burden, and to make energy cheap.
“That’s an agenda that’s really positive for investors.”
Global shifts towards growth
Holt says the deregulatory agenda is already prompting a move to pro-growth policies in major economies, with the UK and China leading the way.
In the UK, the left-leaning Keir Starmer government is making a sharp turn away from its early tax-and-spend policies.
“Starmer is becoming more of a Tony Blair type character. They are realising that tax rises and big spending cannot create growth.
“They’re talking about bank deregulation and getting people back into the workforce.”
UK households have deleveraged over the past 15 years, creating conditions ripe for growth.
“In 2010, the UK had leveraged up too much – bank loans less deposits was GBP700 billion," says Holt.
"Today, that’s reversed and there’s a GBP500 billion more cash deposits than loans. That’s a GBP1.2 trillion swing, or 40 per cent of GDP. If you can get bank lending going, you can have GDP plus growth again.”
China is also showing signs of alignment with the US approach, with a renewed emphasis on domestic reflation and stimulus to drive consumer spending.
“China had also been pursuing austerity – but the deal between China and the US has to involve reflating the domestic economy.”
Holt says the US strategy is reminiscent of Ronald Reagan’s 1980s structural changes where coordinated deregulation and global trade realignments reset economic power.
“What Trump is doing is very much like Reagan’s Plaza Accord which enriched the Japanese consumer, rebalanced trade ratios and lowered the US deficit.
“If we can get Chinese economic reflation like Japan saw in the 80s, it would be extremely positive for Australian resources.”
ASX resources to benefit
Holt says Australia’s resource companies are among the biggest potential winners from the pro-growth agenda and the global shifts it is triggering.
“Resources have been absolutely smashed for 20 years. They’re so cheap,” he says.
“We’re positioning ourselves there because we think it’s in a good spot.”
Other ASX companies set to win from global economic growth include the Rupert Murdoch-controlled News Corp and electricity and gas retailer Origin Energy.
“Despite the name, only a tiny percentage of News Corp’s revenue comes from news – it really a holding company for realestate.com, a global sports and entertainment business called DAZN, and Dow Jones, which is a data company.
“These are great data businesses, great tech businesses. Murdoch has done an incredible job reinventing the company.”
For Origin, the value lies in its investments in renewable energy and vertically integrated software tools for energy companies.
Origin owns British renewables leader Octopus Energy, which uses AI to manage hundreds of thousands of customers. It also holds a stake in Kraken, a software platform that helps utilities service 60 million customers globally.
“These are great assets,” Holt says. “Octopus and Kraken are revolutionising how energy is managed. Kraken alone could be bigger than Origin itself one day.”
James Holt is head investment specialist with Perpetual’s Aussie equities team
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