06 November 2024
If you are covering the news that Donald Trump looks set to be elected as President of the United States, please find below a comment from Lindsay James, investment strategist at Quilter Investors, on what it means for markets and the economy:
“Following weeks and months of polls showing the US election to be on a knife edge, Donald Trump appears to be romping to victory, with each of the swing states projected to fall his way. With control of the Senate too looking as if it will shift to the Republicans, there will be a sea change in the political and economic handling of the largest economy in the world. The House still hangs in the balance, but likely to reflect the popular vote, and the chances of a red sweep are increasing.
“That said, the economic impact of this new Trump presidency is likely to be volatile. While he, and others that surround him such as Elon Musk, want to cut the size of the state, public spending is likely to remain very high and taxes kept low. Many of his measures will be inflationary and likely to lead to a rise in bond yields, putting pressure on the Federal Reserve in its quest to bring interest rates down.
“Investors have already responded to the news that Trump will regain power. Bond yields are up and the dollar has risen too as a result. Widespread tariffs will now likely be implemented, choking global trade in the meantime, while the deficit is likely to grow ever larger, at a time when markets are getting a little nervous about the sheer scale of spending. While the economy was perhaps the defining feature of this election for voters, an emboldened Trump presidency is likely to add fuel to the fire.
“While over the long-term US elections have had a minimal impact on stock markets, investors will likely see a Trump presidency as a positive for the share prices of many of America’s companies. With proposals for business tax cuts paired with steep tariffs on imports, US corporate profitability is projected to improve, although tariffs will elicit an international response and far-reaching consequences. Indeed, in our recent survey of some of the world’s largest asset managers, a Trump presidency was seen to be mildly positive for markets, compared to no change for a Kamala Harris administration – although highlighting his volatile nature, the spread of views for Trump was far greater.
“Volatility is likely to be the defining feature of this presidency. With the future of Ukraine now in the balance, and geopolitical risks seemingly increasing every day, investors will be best placed to try to block out the noise, remain invested and base their decisions on the fundamentals of corporate America, instead of the measures enacted out of the White House.”
