Views on the result of the US election
Following the announcement that Trump is due to make a return as the 47th president of the US, we asked some of our leading fund managers what this might mean for markets and investors. While it is a couple of months until Trump will be inaugurated, markets have already reacted – positively in the US and the UK, less so in Europe.
Mark Hawtin, Head of the Global Equities team:
The outcome of the US election was more decisive than many perhaps expected with Trump securing a clear victory of 295 votes to become the next president. Following the result the dollar soared, with expectations of stronger US economic growth, while US and UK equities rose and Bitcoin hit an all-time high. Trump has made tariffs a central part of his promise – if enacted these will hurt non-US companies exporting to the US. Chinese car companies are the most obvious target. China’s Hang Seng index closed -2.23% down on Wednesday.
We expect that, depending on the eventual size of victory, other areas for focus for Trump will be the rolling back of regulation, tax cuts and the impact on the deficit. This is likely to be positive news for the industrials and financial sectors, as well as energy, while crypto currencies should also benefit. However, overall, for the Global Equities team, the outcome of the election, while having clear short-term differences to market perception, will not change the driving concern mounting for US investors that the level of national debt and the interest burden is becoming unsustainable. With Trump spending plans ranging between $8–10 trillion, this could have significant further impacts on the economy and debt levels.
Phil Milburn, Co-Head of the Global Fixed Income team
At the time of writing Trump has won the presidency, the Republicans have won the Senate and are on course to win just over the 218 seats needed for control of the House too. US Treasury yields are significantly higher as Trump version 2.0 with full Republican control of Congress is digested by the market.
I estimate that President Trump will start quickly on tariffs for some regimes he sees as strong competitors (the most obvious example is China) but use the threat of tariffs to negotiate with other trading partners (e.g. the EU). Tit-for-tat US/European tariffs would raise inflation and hurt growth, but impact Europe more severely than the US. An increase on tariffs to 10% for all imports would, if there was full pass through to the consumer, add about 0.8% to US inflation. This would be mostly felt in the second half of 2025 and the first half of 2026. In the longer term, tariffs create a headwind to global growth, trade is not a zero-sum game.
For the Federal Reserve the boost to inflation and any additional fiscal stimulus (the deficit is already 6.3% of GDP) is likely to slow the pace of rate cuts. The terminal rate the Fed will target in this cycle will be higher than previously envisaged. The fear of Trump’s interference and the ongoing fiscal largesse means the bond market will want more of a term premium for investing in US Treasuries, but a lot of that is already reflected in bond prices.
Simon Clements, Investment Manager, Sustainable team:
Trump has won and as he promised, he’s won big. This undoubtedly gives him licence to change the political and economic landscape in the US and worldwide in the next four years. The most obvious, and arguably most important area, is the urgent need to decarbonise the global economy. Trump will take the US out of the Paris agreement again and will undoubtedly make this challenge more difficult to achieve.
From an investment perspective we are less concerned. Trump is a deal maker, and he will pursue the most cost-effective option to achieve his lofty ambitions. While this will result in more oil and gas being drilled in the US, it is doubtful he will pursue coal over renewable energy. Renewable energy is the most cost-effective way to power our economy, and the technology hasn’t relied on subsidies to be competitive for years. In fact, the last Trump term was a golden era for renewable energy in the US, despite what is paraded in front of his supporters.
Many of our investment themes, such as Improving the Management of Water, will be at the heart of rebuilding the American industrial heartland which Trump is promising to do. Next week I will be in Chicago visiting many of these companies, such as Advanced Drainage Systems, which builds storm water drains from recycled plastic and is the number one player in its market.
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