Donald Trump won the 2024 US presidential election in a ‘landslide’ victory. The Republicans regained control of the Senate, while the House remains up for grabs.
The market reacted to Trump’s win in various ways. The S&P500 jumped after the news and has been trending up afterward.
Economic Policies & Implications
In his political campaign, Trump has advocated various policies, such as heftier deficit spending, implementing import tariffs, slashing corporate taxes, supporting deregulation, a pro-crypto stance, and a more restrictive immigration policy.
The implementation of these new policies will undoubtedly have an impact in the forthcoming years. We will pay particular attention to the economic repercussions that could affect our investments.
Inflation
The higher spending deficit, higher import tariff, and restrictive immigration policies fuel the concern that inflation may resurface.
Under the Trump administration, economists project that inflation may stay elevated above the target 2% range the Fed aims for.
Higher inflation will force the Fed to slow down its rate-cut cycle or reverse its rate policy.
The bond market has been pricing in this scenario. Even with the Fed rate cut, the long-term bond yield has recently reversed by trending higher.
Higher Rates & REITs
The higher rates for longer potentially mean bad news for highly leveraged businesses, such as REITs.
Indeed, the iEdge S-REIT Leaders Index has been selling off recently in anticipation of higher rates lasting longer than expected.
REIT investors may need to be prepared for volatility should inflation rise again under the Trump administration.
Crypto Market
The crypto market has rallied hard recently because of Trump’s pro-crypto stance.
With the suggestion to establish a government strategic reserve in Bitcoin, the formation of a crypto advisory council, and potential deregulation, it’s no surprise that the market surged, anticipating solid backing from the US government.
Tariffs & The HK/China Market
Trump is known for his tariff policies. Some of these tariffs were already implemented in his first term as president. He has promised to impose additional tariffs in his current political campaign, emphasizing targeting the Chinese market.
In 2023, China’s exports to the United States exceeded USD 500 billion, and the United States is still China’s leading trading partner, accounting for ~15% of its exports.
Unfortunately, the additional tariff may disrupt this export market, affecting businesses in China that rely heavily on exports to the United States.
While these tariffs could give US businesses an edge over their Chinese competitors, they could simultaneously hinder US businesses that rely on Chinese imports.
What Can We Do?
A new administration may inevitably bring different economic policies that may impact the market’s movement in the short to medium term.
However, we are here to build long-term wealth. If we have a long-term mindset, these short-term market reactions should not affect us too much. A resilient long-term portfolio should be able to weather these short—to medium-term market conditions.
Instead, we can use this opportunity to assess our portfolio and see how well it performs through different market conditions.
For example, if this election result negatively affects your portfolio, you may be over-concentrated in certain asset classes. This could be your opportunity to diversify your portfolio.
Or, if, for example, you missed the recent rally due to your lack of exposure to specific asset classes or geographies, again, this could be your time to diversify your portfolio.
Ultimately, no matter the election outcome, history shows that the market generally trends upward over the long term.
Happy investing 🙂
