The US election looks as if it has come and gone without incident as Mr Trump not only easily won the presidency of the United States, but also led his party to control of the Senate. With the outcome in the House pending, Mr Trump could very well have a clear mandate for at least two years (until the 2026 mid-term elections) to deliver on his many promises, which should be interesting because he has offered a smorgasbord of “ideas” to appeal to a broad swath of voters. Mr Trump’s many promises, coupled with dissatisfaction with the incumbent Biden Administration, overrode the negative attributes associated with Mr Trump, including his 34 felony convictions. Let’s see what Mr Trump and his party can get done in the next two+ years.
Why was an expected close election ultimately such a blowout?
Ms Harris and the Democratic party were long on philosophy and short on details, a criticism she faced throughout her short campaign
Americans have been scarred by inflation, especially the middle class and the poor; even though inflation has declined massively and even though it was clearly caused by monetary and fiscal policies after the pandemic – experienced by nearly every major country in the world – the blame fell onto the shoulders of President Biden and his party
Immigration was an issue that proved particularly inflammatory. Mr Trump and his party’s claims regarding immigrants were clearly exaggerated and often blatantly false, a page right from Mr Trump’s typical playbook, but it resonated with Americans, many of which take Mr Trump at his word
Americans preferred the Republican platform consisting of a smaller “regulation-light” government and lower taxes
What does this mean for investors?
These themes are generally agreed in the financial press now so are admittedly not original.
US stocks should generally like Mr Trump’s policies, because he has promised to reduce regulation and cut corporate taxes further
Within US stocks, sectors like energy, large banks/financial services, healthcare, defence and automotive companies should benefit, while companies dependent on a global market like retailers will be hurt (from tariffs)
European stocks, and potentially other foreign stock markets, will be under pressure because of risks that Mr Trump’s tariffs will curtail foreign companies’ exports (to the US) and reduce their earnings
US Treasuries will continue to feel pressure, with yields increasing as Mr Trump’s policies will increase the US deficit and the already gigantic US debt; his policies are also clearly inflationary
Corporate credit spreads should remain near record lows for the same reasons that benefit US stocks (i.e. less regulation, reduction in corporate taxes)
Bitcoin and its crypto brethren should benefit as Mr Trump has promised to lighten regulation and embrace the cryptocurrency market
Gold could go either way. It could fall on lower risk of a volatile transfer of power, or it could increase as inflationary pressures resume
The Dollar should remain resilient as high yields attract flows into the greenback.
Just for the record, I have included below closing levels of various financial indices and assets so you can monitor how the new Trump Administration does as it settles in. I will note beforehand that US futures and the US Dollar are sharply higher this morning on Mr Trump’s victory, and US Treasury bonds have been hammered (as yields have increased).
The platform and the promises
As mentioned already, Mr Trump has promised a broad array of things to voters and constituents, including:
Gain better control of the US borders and undertake the largest deportation of illegal immigrants in US history
End wars within weeks of winning the election in Ukraine and Middle East (and also no new conflicts during his administration)
Extend the 2017 Trump tax cuts and further reduce the corporate tax rate
End taxes on tips
End taxes on social security (and otherwise no change / reform to social security)
Expand the child tax credit
Lower oil prices by dialling back restrictions on US oil production
Generally lower inflation and improve the cost-of-living for ordinary Americans
Let’s see how he does.
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