The results are still coming in, but Donald Trump has declared victory in the 2024 US elections and the markets are reacting. What do the experts say? PBI asks them
Looking at Trump’s campaign promises, as well as his actions during his last presidency in 2017, we expect his presidency to lead to reduced regulation across the board. In addition, he is expected to focus on immigration and greater use of tariffs in international trade. How this will play out and be received by the markets remains uncertain.
The 2024 elections were divided. With so much noise it will certainly have an impact. We remain focused on achieving long-term investment results and remain confident in our current positioning. We think that making bold decisions about the future based on a single event can lead to bad decisions.
There is potential for greater short-term volatility in bond markets in the aftermath of the election. We think this is especially likely around US government bonds, as sentiment adjusts to performance.
Any higher inflation could also cause interest rates on long-term bonds to rise higher than on short-term bonds. This is sometimes seen as a signal of the start of a strong economic period, but can also indicate a time of higher interest rates.
As the US remains the benchmark for global fixed income, the broader global bond market could be affected. We will continue to monitor these markets closely and will adjust our positioning if there is a material change in the outlook and opportunities presented.
Given Trump’s focus on international negotiations, sectors linked to international trade – especially technology and consumer goods – may experience more volatility. On the other hand, his emphasis on deregulation and corporate tax cuts could provide a short-term boost to sectors such as traditional energy, finance and defense.
Smaller companies in the US could be hit harder by any post-election volatility, but we believe this is a near-term concern. In our view, global small cap valuations are currently strong and we expect US small caps to perform well over the medium term. We will continue to watch this space with interest as Trump’s campaign promises come to fruition.
Elections, especially ones as controversial as this one, have a way of fueling short-term market volatility. However, history has shown that it is unwise to make drastic adjustments based on political events. Market volatility is often based on speculation rather than a change in fundamentals.
While elections can cause temporary volatility, we believe that maintaining discipline and building a diversified portfolio is the most effective way to create long-term value. It’s important to remember that the biggest risk from market events is the bad decisions we can make when they happen, not the consequences of the events themselves.
As Donald Trump looks increasingly poised for a triumphant return to the White House, the dollar has gained ground against a basket of currencies. Investors are bracing for tariffs and a restriction on immigration, policies seen as inflationary and likely to mean higher interest rates in coming years. Trump’s more renegade approach to trade is likely to drive the US further away from global institutions and the rules-based order built over decades. But at the same time, expectations are high that a Trump presidency will mean less regulation of big tech and big finance. While Kamala Harris could still pull off a victory, her chances of victory have diminished.
US futures point to a positive rally on Wall Street, with Tesla among the early gainers. Elon Musk is a staunch supporter of President Trump and traders believe a second Trump administration will see a lighter touch on regulations. While a rally in the tech sector may be on the way, trade tariffs could ultimately have a negative impact on the sector as they could potentially exacerbate trade tensions with China and disrupt international supply chains for key components. Bitcoin has also surged to an all-time high as crypto fans expect a more supportive regulatory environment.
In bond markets, government bond yields have risen sharply as traders assess the implications of a new Trump presidency for inflation and U.S. government bonds. Not only are a series of tariffs expected to be imposed next year if Trump wins, raising the price of imported goods for American shoppers; his promise to kick out immigrants with waves of deportations could also have economic consequences, potentially pushing up wages. invoices for companies. His promises of tax cuts are also seen as inflationary and are also raising wariness about further escalating the massive US budget deficit. Republicans have already captured the Senate, but it is still unclear which party will prevail in the House of Representatives, which will also have significant consequences for future budget agreements. If the House turns blue and Democrats win a majority, it could limit Republicans’ ability to pass sweeping tax cuts.
There is, of course, a chance that Trump will not implement his toughest trade policies, which played a leading role in the presidential election campaign. He promised to raise tariffs on most foreign products by another 10% and impose much higher duties on goods from China. Even if such heavy tariffs are not imposed soon, the threat of them is likely to make China-US relations much more uncertain in the coming years and further hinder China’s economic recovery. However, his isolationist approach could make it more difficult to contain China in the medium and longer term, as Trump is unlikely to want to build alliances in the same way we saw under Biden and this splintering effect could allow China to build new partnerships forms. in a broken world.
There is a risk that inflationary pressures in the US, driven by higher rates, will be exported. As the dollar rises, countries that import commodities priced in USD may also see price increases, which will either have to be absorbed by companies or passed on to customers. If other countries start to feel the negative impact of higher rates on their economies, there may be more demand for the dollar as it is considered a safe haven. This could be counterproductive to efforts to increase US exports, as the stronger dollar is likely to make US exporters’ products less competitive globally. When it comes to Europe, an increase in tariffs on exports is likely to cause some pain, but with the dollar also strengthening and likely to be strengthened further due to inflationary pressures, currency changes could hurt the UK and European helping the economy Companies maintain their competitiveness
Oil prices have fallen on expectations that more crude oil will flow from US sources under Trump. Given his America First mantra, another Trump presidency will likely emphasize energy independence and his policies will likely favor fossil fuels, promoting deregulation in the oil, gas and coal industries. Brent Crude has fallen below $75 a barrel as traders also digest data showing U.S. crude inventories rose by 3.1 million barrels last week, more than expected. Close attention is also being paid to the Fed’s comments on Thursday after its interest rate decision, which could also help paint a picture of expected demand in the world’s largest economy.
‘US Election 2024: The Markets React’ was originally created and published by Private Banker International, a brand owned by GlobalData.
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