As Donald Trump appears poised to return to the White House, financial analysts are projecting significant impacts across currency markets, stocks, bonds, commodities, and emerging economies. Here’s a breakdown of potential winners and losers:
Currencies
The US dollar is expected to strengthen under a Trump presidency. Analysts anticipate that his economic policies, aimed at boosting inflation and economic growth, would lead to the Federal Reserve maintaining high interest rates, making the dollar more attractive to investors. Citi analysts predict a 3 percent rally for the dollar in the short term following a Trump victory.
However, Trump’s protectionist trade measures, including proposed import tariffs and a push for NATO allies to contribute more to defense costs, could suppress economic growth in other regions. This could drive further demand for the dollar, especially if the euro weakens significantly. A euro fall below the $1 level is possible if domestic tax cuts and trade barriers materialize.
China’s yuan could also depreciate further, as it did between 2018 and 2020, especially if tensions escalate. Conversely, currencies like the Swiss franc might remain resilient, supported by high-value exports and its status as a safe haven amid inflationary concerns. Analysts also point to a potential upswing for cryptocurrencies like Bitcoin, as a more lenient regulatory environment under Trump could attract investment.
Stocks
Stock markets will likely benefit from Trump’s lower corporate taxes and promises of deregulation. Sectors like banks, defense, fossil fuels, and technology could see gains driven by economic growth and inflation expectations. Goldman Sachs estimates that cutting the corporate tax rate from 21 percent to 15 percent could boost S&P 500 earnings by about 4 percent.
Yet, there are uncertainties. Trump’s protectionist policies, particularly his tough stance on China, could increase costs for multinational companies and potentially hurt profitability.
Rising US interest rates and a strong dollar may further challenge companies with significant exposure to global markets. Trade-sensitive sectors, such as automotive and semiconductor stocks, could experience volatility, and European corporations may face profit declines if trade tensions flare up.
Given Trump’s intention to reverse climate regulations, investors are particularly cautious about clean energy and electric vehicle sectors. Barclays has warned of possible “high single-digit” earnings drops for European firms if trade conflicts are reignited.
Bonds
Trump’s fiscal policies are expected to increase government spending, potentially adding $7.5 trillion to the deficit over a decade. Such fiscal expansion could drive up Treasury yields, as seen in October when yields rose by 50 basis points in anticipation of a Trump win.
With inflationary pressure likely to limit the Federal Reserve’s ability to cut rates, Treasury yields may remain elevated, pushing borrowing costs higher. Trump’s policies could also slow economic growth in regions like Europe and Asia, affecting global bond markets and limiting the scope for international central banks to adjust rates.
Commodities
Trump’s plans for increased oil and gas drilling could ensure the US remains a top global petroleum producer, potentially capping crude oil prices. Nevertheless, a tougher stance on Iran, including stricter oil sanctions, could constrict global supply and lift prices. Plans to refill the Strategic Petroleum Reserve could also drive up crude demand.
Agricultural markets may also feel the impact. Renewed trade tensions with China could affect exports of key US commodities, like soybeans, which have already seen a 25 percent price decline year-on-year. China’s recent lack of compliance with a 2020 agricultural trade agreement has compounded fears for US farmers.
Emerging markets
Emerging economies are bracing for challenges under Trump’s policies. Tariffs on Chinese goods and a proposed 200 percent tariff on Mexican vehicle imports could hit the Mexican peso hard, potentially driving it past 21 to the dollar. In Latin America, a suggested 10 percent tax on remittances, championed by Trump’s running mate, JD Vance, could impact economies heavily reliant on this income.
Currencies like the South African rand, the Brazilian real, and stock markets in emerging nations remain vulnerable to global trade tensions. Semiconductor exporters in Taiwan and South Korea, whose products are crucial to Chinese tech companies, also face risks.
However, emerging markets focusing on domestic growth or resource exports may benefit. India and South Africa could emerge as relatively safe havens, while Chile’s copper and lithium sectors might remain resilient due to their unique export profiles.
Sustainable investing
A Trump administration could derail the progress made in sustainable finance. Rolling back environmental regulations and rescinding funds allocated for clean energy under the Inflation Reduction Act would likely benefit traditional energy companies while harming renewable sectors. Some initiatives might require Congressional support, complicating their implementation.
Trump has also vowed to remove Gary Gensler, the current chair of the US Securities and Exchange Commission. This could weaken the push for environmental, social, and governance (ESG) standards and reduce the influence of sustainable funds, which have already struggled due to high energy prices affecting returns.
