Trump victory: US stock market makes up more than 60% of the global market
The victory of Donald Trump in the US election is expected to boost defence and oil and gas stocks, and lift cryptocurrencies.
The FTSE 100 jumped as the news of his imminent triumph in the closely fought race broke this morning, while the dollar soared and bitcoin hit a new record.
With the US stock market making up more than 60 per cent of the global market, all investors have exposure to it one way or another, so it has an outsize importance on portfolios.
The superpower either controls or heavily influences interest rates around the world, international trade via tariffs, corporation tax on the biggest global companies, and geopolitics (meaning, bluntly, whether we are at war or not).
Meanwhile, the President-elect even has a market strategy named after him, the Trump Trade.
We round up the immediate reactions to the election result from money experts, and look at what the next US administration’s shift in economic and political direction will mean for investors.
What will US election result mean for financial markets
‘With Trump’s victory now certain, bond yields have risen, in tandem with the dollar, while stocks have also responded positively in the US,’ says Isabel Albarran, investment officer at Close Brothers Asset Management.
She reckons the market reaction will be more benign than in the event of a Kamala Harris victory, and though it may reignite inflation fears, the near-term economic outlook remains positive.
‘Over the long term, if Trump delivers on his pre-election rhetoric, we expect his term to be more inflationary than a Harris administration, with tariff plans, tighter immigration controls and tax cuts all potential sources of inflationary pressure.
“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.’
Albarran expects the Federal Reserve to go ahead with an anticipated quarter point cut in US interest rates tomorrow, but says the pace of further easing may be more moderate.
‘Ultimately, we do not expect today’s result to threaten the US barnstorming economic performance. With over $1trillion 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.’
Justin Onuekwusi, chief investment officer of St. James’s Place, says: ‘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.’
Onuekwusi says there is potential for higher short-term volatility in bond markets, particularly 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.’
Regarding stocks, he says sectors tied to international trade like 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.’
Onuekwusi adds: ‘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.’
Blair Couper, investment director at abrdn, says: ‘ A Trump victory is likely to mean a more lax regulatory environment, escalating trade tariffs and potential attempts to repeal components of the Inflation Reduction Act (IRA).
‘Markets had already been pricing in the likelihood of a Trump victory, however it is looking likely that the Republicans will take a sweep of Congress which will make it easier for the party to enact their policy agenda.’
He says sectors that could come under pressure are those more likely to be subject to tariff increases, and areas of the IRA that are easier to repeal, such as European auto manufacturers, electric vehicles, and offshore wind.
‘Share prices of US companies with supply chains in China are also likely to react negatively whilst domestic manufacturing and US small and mid-cap companies are likely to outperform.
‘With President Trump at the helm, America also faces elevated inflation risks from these policies so we’re likely to see rate sensitive sectors react and the dollar strengthen.’
Couper notes banks could perform well as rates stay higher for longer, while real estate and growth equities would likely be negatively impacted – though this would be offset by the positive view for markets overall from Trump’s policies.
Donald Trump’s win: Sectors which could benefit
Defence
‘Trump is expected to strengthen America’s defences which creates more opportunities for defence companies,’ says Dan Coatsworth, investment analyst at AJ Bell. he tips:
VanEck Defense ETF (Ongoing charge: 0.55 per cent)
‘It has 64 per cent of assets in relevant US-listed names. Its portfolio includes American government and military contractor Booz Allen Hamilton which is an intelligence specialist; Palantir Technologies which helps the US army with data insights; and Leidos which supports homeland security and is active in weapons systems research and development.’
Oil and gas
‘A Trump election victory could also create a tailwind for domestic fossil fuel producers in an effort to fortify America’s energy security,’ says Coatsworth. He tips:
iShares Oil & Gas Exploration & Production (Ongoing charge: 0.55 per cent)
‘Approximately two thirds is held in US-listed assets, including a stake in EOG Resources which is one of America’s key oil and gas players.’
Cryptocurrencies
Trump plans to make America ‘the crypto capital of the planet’ and build a strategic reserve of bitcoin, notes Coatsworth.
Bitcoin soared to a new record of $75,371.69 this morning,- topping the previous record of $73,797.98 in March.
US markets
‘If you are bullish on US equities and believe a Trump win will spur another leg up for the market, then the simplest way to capture this is by buying a low cost index fund,’ says Jason Hollands, managing director at Bestinvest.
But he adds: ‘Owning an S&P 500 index fund will mean have significant exposure to the Big Tech stocks that are facing increased scrutiny under anti-trust regulations.’
He therefore also tips a more defensive ETF, which owns the largest one thousand companies but weights them not on market capitalisation but four fundamental factors.
These are sales and cash flow (five-year averages), book value (at review date) and average total dividends (over five years).
SPDR S&P 500 UCITS ETF (Ongoing charge: 0.03 per cent)
FTSE RAFI US 1000 UCITS ETF (Ongoing charge: 0.39 per cent)
US small and mid caps
‘Trump’s “America First” approach and potential tariffs, especially on Chinese goods, may create advantages for US-based small and mid-cap companies, says Darius McDermott, managing director of FundCalibre.
‘This protectionist stance could shield them from international competition and potentially boost their market share.’ He tips:
Artemis US Smaller Companies (Ongoing charge: 0.75 per cent)
T. Rowe Price US Smaller Companies Equity (Ongoing charge: 0.96 per cent)
Jason Hollands also has a fund tip with exposure to small and midsize companies that could capture potential upside from the focus on domestic growth.
Premier Miton US Opportunities (Ongoing charge: 0.68 per cent)
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