Market comment: Donald Trump elected as 47th president of the United States
After an electoral campaign marked by numerous twists and turns, the electoral process ended with a victory for Republican candidate Donald Trump. The 47th president of the United States will be inaugurated on January 20, 2025. Full results for the congressional elections are not yet known, but at this point it is clear that the Republicans have gained a majority in the Senate.
Trump's main policy themes
Three themes of Donald Trump’s campaign programme are likely to have an impact on the US economy and, more broadly, on the world economy in the coming quarters.
- On the tax front, Trump has announced that he wants to lower the tax rate on American businesses, which would support company profits but could further widen the US budget deficit.
- In terms of trade policy, Trump favours higher tariff barriers on imported goods, particularly from China. This tightening of American trade policy is not new: during his first presidential term, Trump already imposed higher tariffs on a broad range of imported goods.
- In terms of immigration policy, Trump is considering much stricter immigration rules, which could have a strong impact on the US job market.
How will financial markets react?
We expect the victory of Trump to be good news for equities, as lower taxes will directly lead to higher company profits. The first reaction in equity markets confirmed this. For fixed income markets, the election result is less positive, as we expect inflation in the US to remain more sticky under a Trump leadership. Next to that, the US budget deficit will increase further (which would also be the case under Harris, but to a lesser extent). Indeed, we have seen US fixed income markets declining this morning in response to Trump’s victory, with yields on 10-year US government bonds moving higher. European yields are actually lower, as the election outcome is considered less positive for the European economy. Finally, we see the dollar strengthening, supported by the higher interest-rate expectations.
After the first market reaction, a lot depends on which policy measures Trump will actually implement and how fast this will happen. This is especially true for Trump's plans to increase trade tariffs, as previous analyses by ABN AMRO have indicated that this could negatively impact global economic growth.
Our investment strategy
Our central scenario is one of a soft landing for the global economy, supported by a slowdown in inflation and interest rate cuts by central banks, particularly in the US and in Europe.
We remain overweight equities, favouring US equities over their European counterparts. We are neutral on emerging-market equities. We are also slightly overweight bonds – in particular European government bonds, which should benefit from central banks’ rate cuts.
Olivier Raingeard
Global Head Equities
