Unless you’ve been living under a rock, you’ll know that the American public recently voted Donald Trump as president. Again.
This has huge ramifications for the U.S. and the rest of the world, and this article will explain what it might mean for the investment market and your cash.
The stock market reacts to Trump
As soon as it became obvious that Donald Trump was to become President for the second time, the stock market reacted accordingly.
This started with stocks, bonds, yields, and even Bitcoin seeing substantial surges as the markets predicted faster economic growth for U.S. businesses and investment-friendly policies.
Here’s how the different stock market indexes reacted to Trump. (information is correct as of writing on November 6th):
- The Dow Jones surged to a record high, increasing by around 3%.
- The S&P 500 hit an all-time high, increasing by 2%.
- The Nasdaq Composite climbed 1.8% to an all-time high.
- The Russell 200 jumped 4%.
Stocks in Tesla rose by almost 13% thanks to Elon Musk’s close relationship with the President-elect and Tesla’s competitors saw their stock drop as a result. The iShares China Large-Cap ETF (FXI) dropped more than 2%, which reflects Trump’s famously anti-China rhetoric.
JPMorgan gained nearly 7% and Capital One saw increases of 11.3%, showing a clear positive reaction. American private prison operators Geo Group saw their stocks rise by 24%, as did CoreCivic, which rose by almost 19%.
Bitcoin infrastructure developer CleanSpark increased by over 14% and many other American-owned businesses saw substantial increases.
Why have the markets reacted so positively?
Donald Trump is seen as a pro-business President and has promised Corporate Tax cuts across the board in an effort to stimulate the American economy. This, in theory, means higher profits and as a result, higher share prices.
There’s also the stability that an all-Republican congress brings, which the markets love. Having a unified approach means that things are more predictable, which in turn means less volatility within the S&P 500 in particular.
What the future may hold for investments
While all of the above indicates a strong investment market, there are some warning signs on the horizon.
For example, Trump is unashamedly pro-American and has built much of his popularity around a harder stance on immigration. As most people know, he’s also very unpredictable as a person and his brand of American protectionism will likely result in uncertainty in the long-term.
There’s also the question of import tariffs, which again formed a large basis of his election campaign. He’s threatened to raise tariffs on China by 40% on all imports to increase American production and create more jobs, but whether this will pan out effectively remains to be seen.
Finally, Trump has touted a flat 10% tariff on imports from every other country in the world, which could significantly deflate asset values around the world. It may also lead to a rise in inflation in the U.S. and beyond, which could negatively affect the investment market in many ways.
Conclusion
Immediate boosts to the stock market are great news for those already invested in American companies and indexes. Trump’s first year may see similar increases in stock prices, but long-term uncertainty is highly likely and the future is far from certain.
At Cedar House Financial, we have vast experience helping clients with their investments. To find out how we can help you, call 020 8366 4400 or email enquiries@cedarhfs.co.uk.