Justin Onuekwusi, CIO of St. James’s Place has commented following the news coming from the US this morning.
He said: “Looking at Trump’s campaign promises, as well as his actions during his last presidency in 2017, we expect his presidency to bring reduced regulations across the board. Additionally, it’s expected he will focus on immigration and a greater use of tariffs in international trade. How this will play out and be received by markets remains uncertain.
“The 2024 election has been a divisive one. With so much noise, it is bound to have an impact. We remain focused on delivering long-term investment outcomes and maintain conviction in our current positioning. We think making bold calls on the future based on a single event can lead to poor decisions.
Macro-economic impact of today’s news
Hetal Mehta, head of economic research at St. James’s Place looks at the potential impact on inflation
“Given the focus of Trump’s campaign messaging on tariffs, as well as his use of the use of tariffs in international negotiations in his past term, we expect these to be a key feature of his second term. This could have a short-term inflationary impact, especially on sectors such as traditional energy, financials and defence, as companies seek to pass on costs through price increases.
“Looking ahead slightly further, Fed Chair Jerome Powell’s current term in office ends in 2026. As Chair, Powell’s policies are key to keeping inflation under control. With Trump potentially preferring an alternative Fed Chair, policy uncertainty could increase further.”
Justin Onuekwusi, CIO at St. James’s Place, looks at the impact on fixed income and equity markets
Fixed income
“There is potential for higher short-term volatility in bond markets in the aftermath of the election. We think this is particularly likely around US Treasuries as sentiment adjusts to the result.
“Possible higher inflation may also cause yields for long-term bonds to rise higher than short-term bonds . This is sometimes seen as a signal for 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 may feel the ripple effects of this. We will continue to monitor these markets carefully and will adjust positioning should there be a material change in the outlook and opportunity set.
Impact on equities
“Given Trump’s focus on international negotiations, sectors tied to international trade – particularly tech and consumer goods – may experience more volatility. On the other hand, his emphasis on deregulation and corporate tax cuts could give short-term boosts to industries like traditional energy, financials, and defence.”
“US smaller companies could be more affected by any post-election volatility but we believe this to be a short-term concern. In our view, the valuation case for global small companies is currently strong and expect over the medium-term US small caps will do well. We will continue to watch this space with interest as Trump’s campaign promises materialise.
Tips for investors responding to today’s result
“Elections, particularly ones as contentious as this, have a way of stirring up short-term market volatility. However, history has shown it is unwise to make significant adjustments based on political events. Market volatility is often based on speculation and not any change to fundamentals.
“While elections may create temporary volatility, we believe remaining disciplined and building a diversified portfolio is the most effective means of delivering long-term value. It is important to remember the main risk from market events is the poor decisions we can make when they occur, rather than the ramifications of the events themselves.”
