The US just experienced an election campaign and result that will likely live long in the history books.
We discussed the potential impact of this in our US Election Spotlight from July, and now after months of debate, we have a new US President. Polls immediately before the election yesterday were extremely close, but while some votes are yet to be counted, Donald Trump has been declared the winner, marking his return as President of the United States.
In addition, the Republicans have officially won the Senate, and they appear highly likely to continue their control of the House of Representatives, although there is not a confirmed majority yet. It therefore seems likely that the Republicans have achieved a “clean sweep.” For bills to become law, they need to be passed through both the House and the Senate; control of both should mean a very powerful mandate.
So far today, we have seen a strong reaction in markets.
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Yields on US government debt have increased, driven by the expectation that Trump’s policies will lead to higher inflation.
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The US dollar has strengthened.
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Stock markets have risen, with smaller, more domestically focused companies leading the rally.
What should investors now consider?
When Trump won the US election in 2016, the result generated significant uncertainty, but this time is different. The polls were much tighter going in, and as it’s his second term, there’s arguably less fear of the unknown. This clarity has supported markets today.
Key policy areas to watch include:
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Taxes: Trump has pledged lower corporation tax and the removal of income tax on overtime and tips—policies likely to boost both business profitability and consumer disposable income.
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Trade: Higher tariffs are expected, which may push up inflation through more expensive imports.
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Immigration: A reduced supply of workers could push up wages and, in turn, inflation.
Higher inflation and a stronger economy could lead to higher interest rates, which may weigh on bonds but support the US dollar. Trump’s business-friendly rhetoric is likely to continue supporting US equities, especially in comparison to other regions potentially affected by tariffs.
However, risks exist:
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Tariffs may damage global trade and growth.
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Consumer discretionary sectors may suffer due to higher import prices.
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Financials and smaller companies could benefit from looser regulation and lower taxes—though rising bond yields may limit gains.
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Traditional energy stocks may outperform, given Trump’s pro-oil stance, in contrast to Harris’s focus on clean energy.
Bottom Line
There are both opportunities and risks from a Trump presidency and a Republican “clean sweep”:
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Lower taxes are likely to benefit businesses and consumers.
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Government spending may rise.
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But inflation, higher bond yields, and tariffs could be headwinds for certain sectors and regions.
Given the complexity of the current environment, active management and diversification through a multi-asset portfolio remain key. We continue to monitor developments closely and stand ready to make tactical adjustments as needed.
