Market analysts expect Trump’s policies to have a positive impact on cyclicals, energy and small caps, alongside a negative impact on safe havens like gold.
Currencies
After Trump’s 2016 victory, the US dollar surged against major currencies, fuelled by anticipation of fiscal stimulus, tax cuts, and infrastructure spending, all of which increased demand for the dollar.
Global X believes this may recur with a Republican-led administration, supporting the US dollar, especially in trade-exposed regions.
Similarly, MFS Investment Management highlighted the potential for further gains as tariffs typically boost the currency, adding that gold and cryptocurrencies may also benefit from a more favourable regulatory environment.
Historically, MFS said, the currency of the country that imposes tariffs tends to appreciate versus the country whose goods face levies.
Yields
Treasury yields rose post-2016 and again on Thursday, as markets priced in growth and inflation expectations tied to spending and tax policies.
Global X noted that while higher yields signal economic optimism, they also raise borrowing costs.
“This set-up is typically beneficial for financials, which profit from a steeper yield curve, while longer-duration assets may face headwinds as yields rise. If fiscal moderation is on the table, however, the impact on yields may be moderated,” the fund manager said.
MFS similarly noted that a second Trump administration’s policy mix could push US Treasury yields modestly higher, though trade restrictions and fiscal concerns may lead to higher term premia due to uncertainties around his unorthodox policies.
Equities
Small caps and cyclicals were standout performers post-2016, on the back of domestic growth optimism and deregulation, with Trump initially delivering on pro-business policies.
Similar sentiment today could favour sectors linked to US domestic growth, aligning with broader market forecasts, Global X said.
Small caps, too, may benefit as confidence around economic growth builds – a perspective reinforcing a more inclusive expansion.
Schroders noted in its post-election analysis that the US presidential election does not change its positive stance on global equities, with a preference for US shares.
“In his previous administration, Donald Trump was focused on the Dow Jones as a barometer of his success,” Schroders’ group CIO, Johanna Kyrklund, said.
Schroders also favours Japanese equities in this environment, which, the firm said, “remain cheap and given our view on a stronger US dollar, should see the Japanese yen weaken”.
“We are negative on European and emerging market equities, which will likely suffer from the upcoming trade war,” said Sebastian Mullins, head of multi-asset and fixed Income, at Schroders.
“Australian equities are expensive relative to their own history and compared to other developed markets ex-US, so we prefer global equities to domestic equities given this outcome.”
Commodities
Oil rallied in 2016, benefiting from Trump’s pro-energy stance, which favoured traditional energy sectors.
A similar approach today could support fossil fuels and infrastructure, Global X said, noting that a potential easing of regulatory barriers would allow for production expansion. However, external risks like OPEC’s decisions and China’s slower economic recovery could limit oil’s upside potential, even with US policy support.
Safe havens
Gold declined after the 2016 election as investors turned from safe-haven assets amid stronger risk appetite.
According to Global X, with renewed fiscal stimulus and pro-growth policies, a similar shift away from gold may occur, as higher growth and inflation expectations typically reduce safe-haven demand.
Nonetheless, tariff and geopolitical uncertainties are predicted to intermittently sustain demand for gold as a hedge.
