The polls had forecast a knife-edge election but as it turned out Donald Trump won a convincing victory in the US presidential election and has completed a stunning political comeback to return to the White House.

The clarity in itself was welcomed by financial markets who had feared a protracted affair with both parties potentially taking some time to concede defeat.

Trump’s vocal support for cryptocurrencies saw Bitcoin surge to new record highs while the dollar strengthened and 10-year treasury yields jumped to 4.406% on the assumption that Trump’s policies, including for sweeping tariffs on imports, will stoke inflation and require interest rates to stay at higher levels for longer.

That sustained a rally in US treasuries which has been in chain since the middle of September when they traded at 3.623%. The desire of a Trump administration to cut taxes and regulation could lend support to US shares. Certainly, that was the pattern in the initial phase of the first Trump administration. However, there may be disquiet after the dust settles on this result about the impact of stubbornly higher rates on businesses and the economy.

Multi-asset portfolio manager at Janus Henderson, Oliver Blackbourn, says: ‘Investors need to be careful that higher-for-longer doesn’t start to become a problem for the economy. A soft-landing feels broadly priced in, but there are cracks in some areas of the economy that may widen if interest rate cuts do not materialise to a large enough degree.’

Alongside the election winners, there were losers. Investors who had backed renewable stocks in the hope a Harris victory would deliver policies helpful to the sector quickly changed tack and shares in relevant companies were on the back foot.

While European equity markets traded higher there were hints of unease elsewhere. The euro dropped 1.5% to $1.0773 due to the potential for US tariffs, which could hit European corporates and result in more rapid interest rate cuts by the European Central Bank.

Asian stocks fell, with the Hang Seng index decreasing by 2.2%, amid heightened tariff threats on Chinese goods and the likelihood of worsening relations with the US under Trump.

Senior investment specialist at Mirabaud John Plassard offered some broader perspective: ‘Election results have little impact on long-term investment returns. Despite the alarmist rhetoric surrounding presidential campaigns, financial markets tend to perform well, regardless of which party is in power.’

Plassard notes that since 1950, the S&P 500 has generated a cumulative return of 359,416% (with dividends reinvested), covering 14 presidents, including seven Republicans and seven Democrats. In other words, a $1,000 investment in the S&P 500 in January 1950, with dividends reinvested, would be worth around $3,594,160 today.

‘This figure shows that investors should not base their strategies on election results, but rather take a long-term view,’ he concludes.

‹ Previous2024-11-07Next ›