Trump’s victory in the US may have been a surprise for many but some markets had been predicting the outcome with bond yields, the US dollar and Bitcoin all up over the last month.
But a Trump victory could also mean a ramping up of trade wars and increased economic uncertainty.
AMP head of investment strategy and chief economist Shane Oliver says the likely investment market implications of Trump’s proposed policies are:
• Upwards pressure on US bond yields from a bigger budget deficit, higher inflation and higher interest rates.
• Upwards pressure on the value of the US dollar (putting downward pressure on the Aussie dollar) because of higher tariffs, higher than otherwise Fed interest rates and increased global uncertainty.
• Upwards pressure on Bitcoin and other cryptos as Trump is seen as supportive of crypto.
• Ambiguity for the US share market. While tax cuts and deregulation will be positive in the short-term, trade wars and higher bond yields will be negative over the longer term.
• US shares are likely to outperform global shares reflecting the tariffs and increased global uncertainty.
• Upwards pressure on US financial and energy shares relative to clean energy shares.
• Upwards pressure on US small caps relative to large caps as small caps will benefit most from the lower corporate tax rate on domestic profits and large caps are vulnerable to a trade war.
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