Columbia Threadneedle Investments: How would markets fare under President Trump?

Key Takeaways

• With Joe Biden withdrawing from the presidential race, and vice-president Kamala Harris expected to succeed him as Democratic nominee, the polls might show a near-term bump for Democrats.
• Financial markets, however, believed to still see Trump as the likely victor, with a good chance at a sweep of the House and Senate.
• It is thought that a Trump presidency would see corporate tax cuts, deregulation, a reversal of the climate change agenda and higher tariffs domestically.
• A more aggressive foreign policy is also expected, notably against China, which could also be bad news for emerging markets. There will also likely be less aid for Ukraine and less support of NATO.
• The impact on the dollar is unclear, but both the fundamental backdrop and the prospect of Trump 2.0 would seem to favour equities. But it’s really a wait-and-see scenario.

Transcript 

Until Joe Biden stepped down as the Democratic candidate in the November US presidential election over the weekend, the news flow had been going decisively in favour of Donald Trump. Kamala Harris, now a near-certainty to become the Democrat’s candidate, should see a bump in the polls.

Nonetheless, the financial markets still see Trump as the likely victor. They also see a good chance of a clean sweep with Republicans taking back control of the Senate and holding on to the House. That would remove obstacles to their policies, notably on the budget.

What will this mean for financial markets? There is a general consensus that a Trump presidency would see corporate tax cuts, deregulation, a reversal of the climate change agenda and higher tariffs.

Although higher tariffs would generate fiscal revenue to offset tax cuts, they would also put up prices. This could push up bond yields. But tax cuts are considered good for the equity market and widespread tariffs would benefit smaller US companies in particular.

A more aggressive policy towards foreign relations, notably China, could also be bad news for emerging markets. Finally, both Trump and his Vice-President pick, JD Vance, are opposed to more aid for Ukraine and less supportive of NATO. Europe would have to meet more of its own defence bill.

The impact on the dollar is unclear: a risk-on equity rally would tend to weaken the dollar, but higher tariffs and concerns in emerging markets would work the other way.

More generally, we should not ignore the fundamental backdrop. The developed world outside the US is beginning economic recovery. Interest rates are headed lower. The US economy seems to have slowed and inflation data have improved, which is also a positive.

There is still a long way to go before the Presidential election and much can change. But both the fundamental backdrop and the prospect of Trump 2.0 would seem to favour equities with a broader benefit beyond the “Magnificent 7”. Elections so far in 2024 have had major market impacts in India, South Africa and Mexico to name just a few. We shall have to wait until November to see just how large the impact of the biggest election of all from a markets’ perspective will be. Until next week, goodbye.

Important information

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). For marketing purposes.

This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) and relies on Class Order 03/1102 in respect of the financial services it provides to wholesale clients in Australia. This document should only be distributed in Australia to “wholesale clients” as defined in Section 761G of the Corporations Act. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

In Japan: Issued by Columbia Threadneedle Investments Japan Co., Ltd. Financial Instruments Business Operator, The Director-General of Kanto Local Finance Bureau (FIBO) No.3281, and a member of Japan Investment Advisers Association and Type II Financial Instruments Firms Association.

In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.

In the EEA: Issued by Threadneedle Management Luxembourg S.A., registered with the Registre de Commerce et des Sociétés (Luxembourg), No. B 110242 and/or Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.

In Switzerland: Issued by Threadneedle Portfolio Services AG, an unregulated Swiss firm or Columbia Threadneedle Management (Swiss) GmbH, acting as representative office of Columbia Threadneedle Management Limited, authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA).

In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). For Distributors: This document is intended to provide distributors with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.