{"id":18872,"date":"2024-11-07T15:19:09","date_gmt":"2024-11-07T07:19:09","guid":{"rendered":"https:\/\/www.syfe.com\/magazine\/?p=18872"},"modified":"2024-11-07T15:19:51","modified_gmt":"2024-11-07T07:19:51","slug":"trump-win-us-elections-updates","status":"publish","type":"post","link":"https:\/\/www.syfe.com\/magazine\/trump-win-us-elections-updates\/","title":{"rendered":"Welcome to Trump 2.0"},"content":{"rendered":"\n
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Source: CNA<\/figcaption><\/figure>\n\n\n\n

The US presidential election has concluded, and Donald Trump has won the presidency a second time with a decisive victory. In addition to Trump’s victory, his Republican party has clinched the Senate and looks likely to take control of the House of Representatives, with some results still pending.<\/p>\n\n\n\n

So what does this mean for global markets? We asked Ritesh Ganeriwal, Syfe\u2019s Head of Investment and Advisory,<\/strong> for his perspective.<\/p>\n\n\n\n

Q1: What do you see as the key policy priorities for the newly elected Trump\u2019s administration, and how might they shape the economic landscape? <\/strong><\/h2>\n\n\n\n

Ritesh:<\/strong> With the likelihood of a Republican sweep, the new administration is positioned to push through a significant portion of its policy agenda. Two areas that financial markets will be watching closely are tariffs and tax cuts.<\/p>\n\n\n\n

On tariffs, Trump has proposed substantial universal tariffs, ranging from 10% to 20% on all imports and as high as 60% on imports from China. If a 10% tariff level were enacted, the IMF estimates it could reduce global growth by around 0.8% by 2026. That said, it\u2019s worth noting that these proposals could also be toned down post-election<\/strong>, with any actual tariffs potentially implemented at a more moderate level.<\/p>\n\n\n\n

Tax cuts are another major focus. Trump intends to extend the tax cuts introduced in 2017 and has even suggested further reducing the corporate tax rate. While these cuts could stimulate corporate investment, they would also contribute significantly to the US budget deficit<\/strong>.<\/p>\n\n\n\n

Broadly, Trump administration policies are likely to be inflationary and could add a layer of uncertainty to markets. <\/p>\n\n\n\n

Q2: With the new administration\u2019s policies potentially becoming more inflationary, do you see the Fed adjusting its monetary policies, and what might that mean for bonds?<\/strong><\/h2>\n\n\n\n

Ritesh: <\/strong>Trump\u2019s inauguration is set for January, so in the near term, the Fed is likely to continue with its current trajectory. We expect 25 bps rate cuts at both the November and December meetings,<\/strong> in line with the guidance provided during the September FOMC meeting.<\/p>\n\n\n\n

Looking ahead to next year, the first rate cut is anticipated in March 2025, which gives the Fed time to reassess the economy and evaluate any policy impacts from the new administration. While we think the administration\u2019s policies could lead the Fed to slow the pace of rate cuts, we don\u2019t expect it to alter the overall lower rate trajectory<\/strong>.<\/p>\n\n\n\n

The 10-year Treasury yield, which has increased to 4.4% now from 3.6% in September, has already priced in much of the expected impact from these policy shifts,<\/strong> bringing yields back to levels last seen in Q4 2023. Notably, the Core PCE Index\u2014the Fed\u2019s preferred measure for inflation\u2014has eased from 3.5% in Q4 2023 to 2.7% last month. This suggests that markets have already accounted for some of the inflationary pressures.<\/p>\n\n\n\n

For bond investors, while some volatility may arise, the focus should be on globally diversified, actively managed bond portfolios<\/strong>. Beyond the Fed, many central banks in both developed and emerging markets are moving toward rate cuts. Portfolio managers can also invest in shorter-term fixed income assets to reduce interest rate sensitivity. There are multiple avenues for bond investors to get excess returns.<\/p>\n\n\n\n

Q3: How might increased tariffs or trade tensions affect investor sentiment towards China?<\/strong><\/h2>\n\n\n\n

Ritesh: <\/strong>For Chinese equities, a few important factors are in play. The perception of China as a US competitor is longstanding and likely already factored into market prices. Additionally, rather than enforcing the proposed 60% tariffs, Trump views tariffs as a negotiation tactic to secure a better deal with China.<\/p>\n\n\n\n

While trade issues are a concern, China has shifted its focus from an export-led economy to a consumption-led economy. Most Chinese companies generate revenue domestically. This means that domestic policies\u2014especially those supporting the economy, labour market, and corporate confidence\u2014are likely more important for Chinese equities. If substantial stimulus measures are introduced,  the Chinese equities could see significant upside potential.<\/p>\n\n\n\n

All eyes are now on the upcoming National People’s Congress (NPC) this Friday, 8 November,<\/strong> where markets anticipate policymakers might unveil major stimulus measures. This event will be key to watch for potential market momentum.<\/p>\n\n\n\n

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Q4: What short-term market reactions do you expect in response to the election outcome? <\/strong><\/h2>\n\n\n\n

Ritesh:  <\/strong>Asset classes responded largely in line with expectations for a Republican sweep, as highlighted in our article US Elections Countdown: Your Quick Guide<\/em><\/a>. US equities rose, with the S&P up +2.5% last night, while bonds saw some sell-off. “Trump trades”\u2014including banks, small caps, and crypto-related assets\u2014jumped notably.<\/p>\n\n\n\n

In the short term, we expect US equities to continue its upward momentum on optimism around potential tax cuts. However, gains could moderate as discussions on tariffs come into play, which may introduce some uncertainty and result in a more mixed outlook for equities. For bonds, we anticipate some consolidation around current levels. <\/p>\n\n\n\n

Q5: Looking beyond the immediate market reactions, what are your long-term investment strategies for different asset classes? <\/strong><\/h2>\n\n\n\n

Ritesh: <\/strong>In the long term, staying diversified remains essential for equity investors. <\/strong>Market reactions to political events are often sharp but short-lived, so focusing on fundamentals is key. For equities, this means looking at metrics like earnings growth and valuations. US equities, especially large growth companies, show decent earnings growth, but valuations are on the expensive side. This is why, in our latest revamp, our Core Portfolios<\/a> have been enhanced to include value and quality factors, as well as small and mid-cap stocks, to drive long-term, superior returns. This approach integrates key strategic factors, enhances diversification, and aims to deliver more sustainable performance.<\/p>\n\n\n\n

For bonds, we maintain a positive outlook, supported by the attractive yields currently available.<\/strong> Historically, the entry yield is a key driver of bonds\u2019 long-term returns, and with the recent sell-off, yields have reached even more compelling levels. This creates an attractive entry point for income-focused investors seeking steady returns.\u00a0 As mentioned above, given the near-term volatility, it\u2019s best to approach this positive view on bonds through globally diversified, actively managed bond portfolios. This strategy allows investors to capture attractive yields while navigating market fluctuations effectively.<\/p>\n\n\n\n

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