Donald Trump has won a historic victory and clinched a second term in the White House, causing a surge in the US stock market, the dollar and bitcoin.
But investors are already weighing up a longer time frame than the immediate reaction to the result and asking how the market could react once Trump takes power in the coming weeks.
With this in mind, a range of investors outline their views on the president-elect Trump’s proposed policies and their impact on the market.
Neuberger Berman: An extraordinary 24 hours
Rebekah McMillan, portfolio manager at Neuberger Berman, argued that Trump’s victory maintains – and possibly strengthens – the US exceptionalism narrative and could support performance within the US equity market broadening outside of mega-cap technology stocks.
“An extraordinary 24 hours and, given expectations regarding the closeness of the race, the Republicans have unarguably outperformed. While the outcome of the House remains unknown, we are watching markets closely. The reaction in initial trading sessions has been clear: risk-on sentiment leading to a broad equity relief rally with a pro-US tilt, lower VIX, USD strength and bear steepening across the curve,” McMillan said.
“In all likelihood, large policy shifts can take months to enact and therefore we would caution against overreaction as markets look to reposition around the result over the coming days. Two longer-term dynamics are likely to persist regardless: a resilient US economy and a deteriorating US debt profile.”
Close Brothers: 2025 should be a good year for the US
Isabel Albarran, investment officer at Close Brothers Asset Management, noted that Trump’s policies are likely to be inflationary and pointed to his tariff plans, tighter immigration controls and tax cuts as potential sources of inflationary pressure.
Outside of the US, international trade is likely to be impacted – especially Europe and Mexico. Trade with China will also be affected, although the Biden administration had a hawkish stance like Trump’s.
“Despite these potential consequences, ultimately, we do not expect today’s result to threaten the US barnstorming economic performance. Aside from October’s soft payrolls, activity has remained robust,” Albarran said.
“With over $1trn 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.”
Quilter Investors: Volatility is likely to be the defining feature of this presidency
Lindsay James, investment strategist at Quilter Investors, said “volatility is likely to be the defining feature of this presidency” and agreed that many of Trump’s policies will be inflationary.
“Bond yields are up and the dollar has risen too as a result. Widespread tariffs will now likely be implemented, choking global trade in the meantime, while the deficit is likely to grow ever larger, at a time when markets are getting a little nervous about the sheer scale of spending. While the economy was perhaps the defining feature of this election for voters, an emboldened Trump presidency is likely to add fuel to the fire,” she added.
“While over the long-term US elections have had a minimal impact on stock markets, investors will likely see a Trump presidency as a positive for the share prices of many of America’s companies. With proposals for business tax cuts paired with steep tariffs on imports, US corporate profitability is projected to improve, although tariffs will elicit an international response and far-reaching consequences.
“Indeed, in our recent survey of some of the world’s largest asset managers, a Trump presidency was seen to be mildly positive for markets, compared to no change for a Kamala Harris administration – although highlighting his volatile nature, the spread of views for Trump was far greater.”
IBOSS: We must consider China's response to a Trump presidency
Chris Metcalfe, chief investment officer at IBOSS, agreed that Trump’s return to the White House is likely to be “positive but volatile” in the short term. However, the inflationary agenda and potential trade disruptions will emerge as negatives.
“One key aspect we must consider is China's response to a Trump presidency, which remains uncertain. China has various options available to it, and their strategy will be critical in shaping global market dynamics,” Metcalfe said.
“I think it would be a mistake to expect the market reactions of the next couple of weeks to continue to play out for the rest of his presidency. As a Trump America becomes more isolationist and further dismantles the globalisation narrative, new relationships will be forged between countries and economic blocks, and it is too early to say how that will look.”
IG Group: Volatility in the year after an election is higher
JJ Kinahan, chief executive of IG Group North America, noted that markets reacted positively to the news that Trump had won the election and pointed to “seemingly good expectations” for the economy as another positive.
“However, there are a several points that traders should keep in mind; those vying for extreme market volatility [following the election outcome] will be very disappointed, and this is actually normal market behaviour,” he added
“But what traders should be aware of is that historically, the volatility in the year after an election is higher, starting in January as the new president takes office and tries to enact their agenda.”
IG Group also listed the sectors that it expects to do well under the Trump presidency as well as the stocks within them to watch. These include financials (JP Morgan, Citigroup), cryptocurrencies (Coinbase, PayPal), defence (Boeing, Lockheed Martin), energy (Exxon Mobil Corp, ConocoPhillips, Peabody Energy Corp, Nucor Corp) and technology (Amazon, Google, Microsoft).
St. James’s Place: Unwise to make significant adjustments based on political events
Justin Onuekwusi, chief investment officer at St. James’s Place, said equity sectors tied to international trade – particularly tech and consumer goods – could be more volatile given Trump’s focus on international negotiations. However, industries like traditional energy, financials and defence could be given a boost by his emphasis on deregulation and corporate tax cuts.
Meanwhile, there could be higher short-term volatility in bond markets, especially around US treasuries, as investors adjust to the election result. The potential for higher inflation might also cause yields for long-term bonds to rise higher than short-term bonds, which sometimes signals the start of a strong economic period but can also herald higher interest rates.
“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,” he said.
“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.”