Donald J. Trump has once again defied the odds and secured a decisive victory in the 2024 presidential election – winning both the senate and the popular vote. After a gruelling campaign on both sides, Trump has reclaimed the White House, promising to usher in a new era of American greatness as the 47th President of the United States.
As the nation reacts to this political comeback, the world watches closely to see how Trump’s leadership will shape the future of the United States and its role on the global stage. We take a closer look at how markets have responded.
Investors are anticipating lower taxes and deregulation, which are central to Trump’s economic agenda. However, the potential for tariffs could impact global growth, leading to some market volatility.
According to Tom Watts, Senior Investment Analyst at abrdn:
‘Wall Street is anticipating lower taxes, deregulation and a president who is quick to promote everything from the stock market to the dollar, leading to record highs being reached on the news of his election, even though tariff hikes could bring challenges in the form of higher deficit and inflation.
‘We can see this in the bond market, with the Republican's win spurring a rally in US Treasury yields as investors digest his potentially inflationary policies. Although the Fed cut rates by 0.25% today, such inflationary policies of deregulation and tariffs could make the Fed more reticent to cut as quickly as previously anticipated and we have certainly seen that in the future markets already, with investors, trimming their expectations of more central bank moves.’
If Democrats keep the House, then a ‘Trump trade war 2.0’ scenario becomes more likely. Trump has significant executive authority to set tariffs without the need for congressional approval.
Overall, Trump’s agenda is likely to increase nominal GDP growth. Tax cuts might boost consumer sentiment, but since the economy is already at full employment, this won’t necessarily lead to real growth in the medium term. As a result, the Fed may cut rates more slowly, and combined with higher debt and inflation, this could push US and global yields higher.
An adviser can prove invaluable during times of change and uncertainty – providing emotional support and reinforcing long-term goals.
Find out how abrdn's financial planning services could help you.
The information in this article should not be regarded as financial advice. Please remember that the value of investments can go down as well as up and may be worth less than was paid in. Information is based on abrdn’s understanding in November 2024.
As the nation reacts to this political comeback, the world watches closely to see how Trump’s leadership will shape the future of the United States and its role on the global stage. We take a closer look at how markets have responded.
Market response suggests confidence in Trump’s economic agenda
So far, markets have responded favourably to Donald Trump’s victory with stock markets seeing significant gains. The US dollar has also surged, reflecting optimism about Trump’s business-friendly policies.Investors are anticipating lower taxes and deregulation, which are central to Trump’s economic agenda. However, the potential for tariffs could impact global growth, leading to some market volatility.
According to Tom Watts, Senior Investment Analyst at abrdn:
‘Wall Street is anticipating lower taxes, deregulation and a president who is quick to promote everything from the stock market to the dollar, leading to record highs being reached on the news of his election, even though tariff hikes could bring challenges in the form of higher deficit and inflation.
‘We can see this in the bond market, with the Republican's win spurring a rally in US Treasury yields as investors digest his potentially inflationary policies. Although the Fed cut rates by 0.25% today, such inflationary policies of deregulation and tariffs could make the Fed more reticent to cut as quickly as previously anticipated and we have certainly seen that in the future markets already, with investors, trimming their expectations of more central bank moves.’
Economic outlook
Much now turns on the outcome in the US House of Representatives, which is still unclear. The Republicans are favourites, but Democrats could still win. If the Republicans do take the House, then scenarios Trump delivers for market will come to the fore, as congressional control would give Trump latitude to pursue tax cuts and deregulation.If Democrats keep the House, then a ‘Trump trade war 2.0’ scenario becomes more likely. Trump has significant executive authority to set tariffs without the need for congressional approval.
Overall, Trump’s agenda is likely to increase nominal GDP growth. Tax cuts might boost consumer sentiment, but since the economy is already at full employment, this won’t necessarily lead to real growth in the medium term. As a result, the Fed may cut rates more slowly, and combined with higher debt and inflation, this could push US and global yields higher.
There’s support if you need it
If you’re not sure how the latest market movements or other economic events may affect your investments, you could consider getting financial advice. A financial adviser provides tailored advice that considers your unique financial situation, risk tolerance, and investment horizon.An adviser can prove invaluable during times of change and uncertainty – providing emotional support and reinforcing long-term goals.
Find out how abrdn's financial planning services could help you.
Keep up to date with what’s happening in global markets
If you want to keep up-to-date with what’s happening in global markets, you can read regular market commentaries from our investment experts, Thomas Watts and Craig Hoyda. You can also tune in to our Wealth Wise podcast hosted by Fraser Kerr, for the latest conversations with industry experts on investment markets, retirement planning and more.The information in this article should not be regarded as financial advice. Please remember that the value of investments can go down as well as up and may be worth less than was paid in. Information is based on abrdn’s understanding in November 2024.