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Investor Insights > News > Donald Trump's return: economic and financial market implications
Donald Trump's return: economic and financial market implications
November 2024
Dan Farmer, Chief Investment Officer
Donald Trump's return as the 47th president of the United States marks one of the most remarkable comebacks in American political history.
Overcoming polling skepticism and significant challenges, Trump achieved what no Republican candidate has managed since George W. Bush in 2004-winning both the popular vote and the Electoral College.
Trump's focus on financial security
His victory underscores the enduring power of economic concerns in shaping voter behaviour. Among battleground state voters, economic issues such as the cost of living were paramount, with 79% of voters identifying the economy as their top issue favouring Trump over Kamala Harris.
The phrase "It's the economy, stupid," popularized during Bill Clinton's 1992 campaign, remains relevant today. Despite a 4.1% unemployment rate, high inflation and rising interest rates eroded Americans' sense of financial security. A September poll revealed that 65% of registered voters believed the country was on the "wrong track," creating a significant headwind for Democrats.
Kamala Harris' lack of connection
Kamala Harris faced a particularly steep uphill battle. Following President Biden's late withdrawal from the race in July, the Democratic Party had insufficient time to hold competitive primaries, ultimately rallying around Harris. This left her with a truncated campaign timeline, making it challenging to connect with voters and present herself as a compelling change agent after four years as vice president.
Lower voter turnout compared to 2020 worked in Trump's favour. While he maintained the support of his base, Harris struggled to energise Democratic voters at the same level as Biden. Trump also made significant inroads with key demographic groups. His share of the Hispanic male vote rose by 18%, securing a majority in this group, while his support among young voters (ages 18–29) increased by 6%. These shifts reflect evolving dynamics within the Democratic coalition, raising concerns about the party's ability to retain traditionally strong support from these groups in future elections.
A unified government and economic impacts
Trump's victory brings a unified Republican government, with the party reclaiming the Senate and holding its majority in the House of Representatives. This alignment provides Trump with a favourable environment to pursue his policy agenda, including tax cuts, deregulation, tariffs, and expanded fossil fuel exploration. The administration's focus on economic growth is expected to boost company earnings in the medium term, but it may come at a cost.
Higher economic growth, combined with larger budget deficits and tariffs, is likely to be inflationary, leading to elevated interest rates. Bond markets have already signalled caution, with 10-year Treasury yields rising in the wake of the election, even as equity markets reacted positively.
Public debt is another significant concern. According to Congressional Budget Office (CBO) projections, government debt held by the public could double over the next decade, reaching $52 trillion. Extending the 2017 tax cuts alone would add approximately $4.5 trillion to the deficit. This fiscal trajectory underscores the potential long-term challenges of Trump's economic policies, despite their near-term growth benefits.
Investment strategies amid political change
Trump's presidency brings both opportunities and uncertainties for investors, highlighting the importance of disciplined, diversified investment strategies. Diversification-spanning equities, bonds, and unlisted assets-remains a proven approach to managing risk and ensuring stable long-term returns.
Private equity continues to be a key focus, particularly investments in mid-sized companies. These businesses often present greater opportunities for operational improvements compared to larger, more established firms. Similarly, infrastructure investments aligned with technological advancements and renewable energy trends provide attractive growth prospects. Examples include investments in fiber networks, telecommunications towers, and electricity distribution systems.
Alternative investment strategies also play a critical role in building resilient portfolios. Assets with cash flows derived from government receivables, legal settlements, or climate-related reinsurance premiums offer returns that are less correlated with traditional market cycles. These strategies provide additional layers of protection against volatility.
Unlisted assets further enhance diversification, offering exposure to sectors less affected by short-term market fluctuations. For instance, infrastructure investments benefiting from economic digitisation and renewable energy trends are well-positioned for long-term growth.
Outlook for investors
Trump's presidency is poised to reshape economic and political landscapes, making adaptability a crucial trait for investors. While his policies may introduce volatility, the core principles of investment discipline-diversification, intelligent risk management, and a long-term perspective-remain vital.
By spreading investments across asset classes, regions, and sectors, portfolios are shielded from overreliance on any single market driver. This approach ensures steady accumulation of returns, even amid uncertainty.
Looking ahead, the investment landscape offers opportunities to capitalise on growth sectors, such as private equity and renewable energy, while maintaining safeguards against potential risks.
By combining a forward-looking perspective with proven strategies, investors can navigate the complexities of Trump's second term with confidence, positioning portfolios for sustainable success in the years to come.
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