Kevin Kidney, Head of Investments, shares his thoughts on the US election result.
Optimism abounds and being globally invested remains the key to our long-term investment views.
The UK elected a new government on 4th July this year. The US returned the compliment on 5th November. Only one event involved fireworks, however.
I find myself fortunate to be in New York City this week, for a long time President Trump’s city of residence.
“Across the ocean to the second chance”
In 2019 Trump switched his primary residence to Florida, and his ‘Winter White House’ – a state which has an easier tax burden. [12] And it is an easier tax(es) burden through which we may view President Trump’s re-election.
Like 2016, the Republicans have swept Congress, gaining working majorities of the US Senate and fighting to keep their majority in the U.S. House. [11]
The +2.5% rise in the S&P500 immediately following Trump’s re-election [3] reflects this Republican ‘landslide’. And is possibly just the start for markets. US growth may continue.[4] Euphoria abounds.
“Do we have to roam the world”
Trump’s Tax Cuts and Jobs Act (TCJA) from 2017 was due to expire in 2025 [1] – and Republicans may look to push through a straight extension of the law, with additional tax cuts for corporate America potentially packaged in. [2]
We have been optimistic on US equity returns since beginning 2023, and our conviction only increases. Hopefully the next stop is 6,000 on the S&P500.[5].
For bonds, as with 2016, higher yields immediately followed Trump’s (re)election.[6] But this is not 2016 – rate cuts will surely continue, but the expected pace has been dialled back. Back in September, markets expected the Federal Funds Rate to be cut from above 5% to below 3%, by the end of 2025. [7]
Expectations are now more modest, closer to 4% for the end of 2025.[10]
The threat of widespread tariffs we believe is a red-herring – President Trump knows a win when he sees one and we do not believe he will threaten the current lower inflation environment.
So, higher bond yields today and the possibility of lower corporate tax cuts tomorrow. Mania for US banks. Perhaps this explains why JPMorgan Chase, my host in NYC this week, is up 11%. [9]
And what of Gold? Down almost 3%,[8] a possible reflection of Trump’s intention to accelerate peace (of a kind) between Ukraine and Russia.
“Take a look up the rail track”
Optimism is about the future – we believe there remains every reason to be fully invested and focused on the possible positive global growth opportunities.
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. This material is not a personal recommendation or financial advice and the investments referred to may not be suitable for all investors.
True Potential Investments LLP is authorised and regulated by the Financial Conduct Authority. FRN 527444. Registered in England and Wales as a Limited Liability Partnership No. OC356027.
True Potential Wealth Management is authorised and regulated by the Financial Conduct Authority. FRN 529810. Registered in England and Wales as a Limited Liability Partnership No. OC356611.
Sources
[1] https://about.bgov.com/insights/elections/2025-tax-policy-crossroads-what-will-happen-when-the-tcja-expires/#:~:text=Key%20provisions%20from%20the%20Tax,expire%20Dec.%2031%2C%202025.
[2] https://news.bloomberglaw.com/daily-tax-report/what-a-trump-presidency-means-for-the-2025-tax-fight-explained
[3] https://apnews.com/article/stock-markets-rates-china-93421462d761eb1402d813cb381fe6e9
[4] https://www.statista.com/statistics/188185/percent-change-from-preceding-period-in-real-gdp-in-the-us/
As of the third quarter of 2024, the GDP of the U.S. grew by 2.8 percent from the second quarter of 2024
[5] https://www.bloomberg.com/news/articles/2024-10-21/strong-wall-street-earnings-will-send-s-p-500-spx-toward-6-000-survey
[6] https://www.reuters.com/markets/us/yields-soar-trump-win-stirs-bond-vigilantes-2024-11-06/
[7] https://www.jpmorgan.com/insights/markets/top-market-takeaways/tmt-rate-cut-breakdown-what-you-need-to-know-now
[8] https://www.kitco.com/news/article/2024-11-06/trumps-america-first-policy-drives-us-dollar-and-bond-yields-higher-pushing
[9] https://www.fool.com/investing/2024/11/06/why-jpmorgan-chase-stock-popped-today/
[10] https://www.forbes.com/sites/simonmoore/2024/10/15/where-might-interest-rates-go-in-2025/
[11] https://apnews.com/article/congress-elections-house-senate-harris-trump-94b49277db2a5c21f23236794a36afa6
[12] https://www.independent.co.uk/news/world/americas/us-politics/trump-florida-new-york-maralago-domicile-less-tax-a9180236.html
