By JAMES SPENCE
This was a considerable victory for Donald Trump. “Trump Storms Back” is the headline in the online edition of the New York Times.
Not just on account of winning the Presidency but also the popular vote, the Senate and likely the House. It heralds four years of unbridled Trumpery. Some find this exhilarating, some find it disturbing.
What seems to have made the difference was less men versus women or cultural aspects, but basic economic concerns. Many working people calculated that they would do better under Trump than under Harris. The Democrats were punished for inflation and Harris’s campaign will be parsed to death by the political class. Trump’s base-line appeal on home economics was under-estimated in what the Republicans (and Trump) see as the best of their three campaigns. It appeared, at times both chaotic and offensive, because it was both these things. Republicans will choose to forget that for now. Even if, for many, Trump is not their sort of Republican.
The global impacts are several. We expect the US dollar to be stronger than it would otherwise have been and interest rates (particularly bond yields) to be higher. The US will, to some extent, retract from the world and some form of forced peace may be attempted in Ukraine. Beijing has been much more actively considering a Trump presidency than a Harris one, partly on account of his pre-advertised economic nationalism (including tariffs) and probably also because the range of outcomes within a Trump presidency are so much wider.
European capitals, for the most part, will be shuddering and the UK foreign secretary will be wondering what level of contact he might expect to achieve. There is a darkish argument, though, that forced peace in Ukraine presages a rebuilding programme in Ukraine which will be good for European companies.
Elon Musk will be elated and his shiny rocket received quite a tribute in Trump’s speech to supporters. It will be interesting to see what form of role Musk plays in the bonfire of the bureaucracies and how he can tilt his hand on EVs, space and other technologies. Similarly, Robert F Kennedy who has been “promised” a role in health. Key appointments will be watched closely.
Other tangential beneficiaries, at least in short term are Bitcoin and the crypto complex as Trump embraced the crypto bros for tactical reasons. Clear beneficiaries are US oil and gas, elements of US manufacturing but perhaps not all of the US consumer basket as tariffs beget inflation.
Mexico/US linkages are a big feather in the US cap but these are now at risk. One wonders how far deportation will actually go. This is a totemic policy but perhaps one that only needs to be followed enough to garner the right type of headlines. Tech bosses and supporters who hung back or supported Harris with funds will be worried. Some of them will be on his enemies list. As Donald likes Elon and Elon does cars, space, media, rockets and tech, an extraordinary period of patronage may ensue that will discomfort some competitors of Musk.
For deep geo-political strategists, there is a possible path to further de-fanging of the threats that exist within Iran which makes the middle-East a more compelling region, not least to itself.
Within the Cerno Global Leaders Fund, we mention the following stocks. Atlas Copco would benefit from industrial renaissance. Assa Abloy would benefit from a construction boom (50% of sales in the US), Rockwell is a prime beneficiary of factory automation in the US. Less immigrants means more need for efficiencies. IQVIA and TMO are levered to US biotech industry which is likely to see benefits of de-regulation. Linde will have opportunities for gas plant demand to expand as oil production and shale production increases.
Finally from me, nobody is preaching sound money. Unsound money was a given, no matter who won.
In the below comments, my colleagues Ion Sioras and Ed Bonsor have mapped some immediate market responses and comments.
James
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– Stocks generally higher but notable index movements – Russell 2000 (+6% in futures) clear winner, S&P winning more (+2.2%) than Nasdaq. American outperformance with Europe very tepid (+0.5% to +0.6%).
– Dollar generally higher (1% to 1.5% against majors) – higher growth, inflation expectations, lower taxes. Deregulation anticipated. Mexican peso weaker by 3%, Chinese RMB by 1.4% after State Bank intervention to stem the flow. A cynical China preparing for a trade war should be devaluing the currency.
– Rates generally moving higher. Will inflation and rates restrain the equity move? Largest daily move in US 30 year yields since 2020 (+25bps to 4.66%).
– China shares down – exporters, solar, technology weighing on the HSI Index. Capital restrictions and trade restrictions to come, as warned by Russell Napier? In the interim, China is poised for further stimulus.
– Fed meeting today, with an expectation of a 25bps cut. Unemployment has been softer and fiscal drag to come. The cut in December is being priced out due to expectations of increased fiscal largesse.
– Neither Harris nor Trump have seriously addressed managing the deficit. Gold, Silver pullbacks. Bitcoin breaking higher (reached new ATH at US$75,000). Gary Gensler is probably finished at the SEC.
– Tesla up sharply in the pre-market. Pershing Square opening strongly (Bill Ackman has been a vocal advocate). Discussion that Big Tech could avoid anti-trust under Trump, on the other hand Trump is a clientelist, is Jeff Bezos and Alphabet on his “good side”.
– Alphabet in the line of fire for the DoJ and as the biggest funder of the Democrats campaign.
– Note that Jeff Bezos did not allow the Washington Post to endorse Kamala Harris.
– Oil slightly lower on easing of drilling regulations (-1.5%). A positive for corporate margins. A deal (however bad) in Ukraine and/or Israel could reduce geopolitical tensions in major oil producing regions.
– Perhaps the biggest question of what happens to Europe now? The populists will be emboldened – fragmentation risk. Defence spending to remain at a much higher level.