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What could a Trump re-election mean for markets?

By Rhea Nath
5 minute read

With the economic implications of Donald Trump returning to office not lost on global investors, their attention remains firmly placed on the US presidential election race, which is set to culminate in November.

Market watchers have cited the results of the US elections, including a Trump re-election, as a key consideration that could impact future investment decisions and outcomes.

With around half of the world population heading to the polls in 2024, the year features a packed election calendar including the likes of India, Brazil, the United Kingdom, Mexico, the United States, and potentially Australia.

According to Ehsan Iraniparast, senior vice-president and emerging market analyst with Payden & Rygel, the US likely presents the highest election risk profile this year.


Speaking at a GSFM media briefing this week, he explained: “We’ve done some analysis, where we’ve gone to each region, each country, gamed out the elections for this year and we actually don’t see a lot of high-risk situations in many of the emerging markets, whether it be Mexico, Indonesia, South Africa, their own issues notwithstanding.

“There’s bound to be [some] surprises, but we expect policy continuity in a lot of these cases.”

Conversely, risks abound in the US under a Trump re-election scenario.

“When [Trump] was elected in 2016, there was a pretty negative reaction for global assets. I think the risk is you have this narrative of US exceptionalism that is already pervasive. [It] explains some of the dollar strength we’ve seen for a number of years now, and he continued that cycle with his very low tax structure, tariff restriction, protectionism,” Mr Iraniparast said.

Additionally, potential immigration reform remains a concern for the analyst.

“I worry a little bit about immigration. There’s been a re-integration of migrants into the US workforce the past little while, that I think is helping at the margin with things like inflation and labour market rebalancing. That was under threat during his last term and could easily re-emerge,” Mr Iraniparast said.

“But then, on the other hand, after that knee-jerk issue, [there was] good performance of the US economy during his regime.”

Ahead of the 2020 US election, ING predicted that a Trump re-election would have seen a boom-bust economic scenario. At the time, the bank’s economists said higher taxes and protectionism would trigger fierce economic headwinds; however, in the years since, both the US and the global economy have experienced significant changes.

Trump regime not necessarily economically damaging

Mr Iraniparast emphasised that ultimately, there would be winners and losers from either election result. He opined that it’s “hard to look at the past and say that things will definitely be negative under a Trump regime”.

“It’s just going to change the winners and losers. You do have potential issues with Mexico, maybe a realignment away from some democracies towards less democratic regimes, these types of switches that we’ll have to be mindful of,” he said.

“I think one thing for sure is it’s going to be an extremely tense build-up to the race and as we get to Q4, people are going to be fretting one way or another.”

But Andrew Swan, portfolio manager of the Man GLG Asia Opportunities Fund, is particularly worried about Asia, noting that the election is “critical” in the context of Asian markets.

“There are some experts who feel that Donald Trump, if he gets back in, will do a deal with China and with Taiwan,” he said.

“He just wants the problem gone [and] does see himself as a deal-maker.”

Looking back, Mr Swan highlighted lessons from the behaviour exhibited by global markets when Trump was first elected in 2016. Namely, Asian markets had just recovered from a deflation scare in China the year prior.

“Going into 2017, the economies were actually very strong. Then what you started to see is markets started to de-rate, the multiples started contracting despite very good earnings,” he said.

“The thing is that, almost to the day, the market started derating in Asia in early 2017 when Trump started talking about trade wars, and despite the economies continuing to be very strong, company fundamentals in Asia started to underperform.”

Also in early 2017, the US withdrew from the Trans-Pacific Partnership, affecting trade dynamics in the region, before later imposing tariffs on a wide range of Chinese goods.

Fluctuations were observed in currencies, stock prices, and commodity markets across Asia.

“That’s one of my concerns – fundamentally, from an economic point of view, the region looks better this year than it did last year. The overhang of the elections and China bashing, which no doubt will happen as an election platform, is something that can certainly impact sentiment towards the region,” Mr Swan said.

Previously, Global X Australia’s David Tuckwell, a senior product and investment strategist, said at an event in Sydney that a Trump presidency “doesn’t bode very well” for the planet, based on initial signs from the campaign.

He predicted solar and wind stocks would feel the sting if the Inflation Reduction Act and subsidies for renewable energy development are scrapped. Namely, Trump has already vowed to gut the landmark climate law which provides over $500 billion in tax breaks and subsidies for clean energy.

“That’s one area that we might see struggle next year as markets anticipate a Trump presidency. [However], it won’t be all bad news for clean energy and the renewable energy transition should Trump win,” Tuckwell added.

Instead, there could be a pivot to uranium and nuclear power, he said.

Trump is in the lead against former UN Ambassador Nikki Haley in the Republican primaries currently underway, having emerged victorious in both the New Hampshire and Iowa contests thus far.

The presidential election is scheduled for Tuesday, 5 November 2024.

What could a Trump re-election mean for markets?

With the economic implications of Donald Trump returning to office not lost on global investors, their attention remains firmly placed on the US presidential election race, which is set to culminate in November.

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