Time to think about a Trump second term | Weekly Market Update

28 June, 2024

Following Joe Biden’s by all accounts catastrophic debate performance, it is time to think again about what a Trump presidency would look like for investment markets. And I think investment markets is an important qualification here. Geopolitics, Russia, China and relations with Europe all feel more unstable and harder to call than under the current Biden administration. For economics, though, the outlook feels a bit more certain. Trump should be pro-US growth, anti-immigration and for lower taxes overall – and especially for corporations and higher earners.

Part of the pro-US growth part will of course be tariffs on imported goods. Trump has talked about a 10% tariff on all imports and much higher ones for the Chinese. At the margin then this should mean:

  • Weaker currencies for exporting nations (like the Euro and Chinese Renminbi) vs the dollar as part of the hit of tariffs is typically absorbed by currency movements
  • A one off hit for exporters to the US. This should mean some short-term out-performance for US equities vs Europe and China.
  • Tariffs mean higher prices for US consumers. Any reduction in immigration numbers would also mean fewer workers and so, at the margin, higher wages. These are both inflationary.
  • This plus a pro-growth, lower tax administration should mean interest rates stay higher than they would have done and hence higher US government bond yields and borrowing costs for US companies and consumers.

Trump should therefore give a short-term boost to US equities and the dollar but not be good news for US government bonds. Some of this will of course already be in the price, but given a Trump presidency still has odds of less than 60% (yesterday at least) some of it won’t. US equities may well be able to keep up their run of exceptional performance for a while longer.

Is there any good news out there for your non-US investments? I have written before about the Economist magazine effect – which is that if an investment story makes if to the front cover of the the Economist you can often make money investing the other way. (The Death of Oil front cover in 2003 – just before the oil bull market began – is a canonical example.) I was therefore struck by this front cover which I saw at a a UK fund manager presentation this week (the excellent Neil Veitch at SVM):




It of course dates back to the last time a centre-left Labour party won a landslide victory (under Tony Blair in 1997). And here are the returns for the 10 years after the edition of Time magazine came out:

return 27.10.97


So here is a magazine cover that proved to be right (for equity markets at least). Compliance would like me to point out these are historic return numbers rather than any representation about what a future Kier Starmer government will look like. But I am just putting this data out to remind myself that it is possible for UK equities to out-perform. Today’s low starting valuations will surely help tomorrow’s future longer term returns. For those of you that are worried about the possibility of 4 more years of Trump, I think you can take some comfort that there looks to be opportunities to make some money outside of the US too.



Chris Brown, CIO

The value of investments may fall as well as rise and you may not get back all capital invested. Past Performance is not a guide to future performance and should not be relied upon. Nothing in this market commentary should be read as or constitutes investment advice.


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