Written by Isabel Albarran, Investment Officer at Close Brothers Asset Management
With Trump’s victory now certain, bond yields have risen, in tandem with the dollar, while stocks have also responded positively in the US. With markets moving in anticipation of a Trump victory, we think the market reaction will be more benign than what we would have seen in the event of a Harris victory.
Over the long term, if Trump delivers on his pre-election rhetoric, we expect his term to be more inflationary than a Harris administrarion, with tariff plans, tighter immigration controls and tax cuts all potential sources of inflationary pressure. Nonetheless, when it comes to the Fed’s interest rate decision tomorrow, we continue to expect the FOMC to deliver a quarter point cut, though the pace of further easing may be more moderate.
Beyond the US, today’s result is likely to impact international trade, especially with Europe and Mexico, with the Mexican peso likely to suffer. China will remain in the firing line, though this has become a bipartisan issue, with the Biden administration continuing Trump’s hawkish stance.
Despite these potential consequences, ultimately, we do not expect today’s result to threaten the US barnstorming economic performance. Aside from October’s soft payrolls, activity has remained robust. With over $1trn of fiscal support still to be digested by the economy and the regulatory backdrop on course to ease, growth has a number of backstops. Moreover, the economy, and the stock market, tends to do well in the first year of a presidency, meaning 2025 should be a good year for the US.”
