Donald Trump is elected President of the US (again). What are the implications for investors and Australia?

LiveWire11-07

Contrary to what would normally be suggested by the solid US economy, low unemployment, falling inflation and strong share market, Donald Trump has been re-elected President of the US. Some ...

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Some ...</p>\n\n<a href=\"https://www.livewiremarkets.com/wires/donald-trump-is-elected-president-of-the-us-again-what-are-the-implications-for-investors-and-australia\">Source Link</a>\n\n</div>\n","source":"livewire_stock","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Donald Trump is elected President of the US (again). 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What are the implications for\ninvestors and Australia?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-07 09:54 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.livewiremarkets.com/wires/donald-trump-is-elected-president-of-the-us-again-what-are-the-implications-for-investors-and-australia><strong>LiveWire</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Contrary to what would normally be suggested by the solid US economy, low unemployment, falling inflation and strong share market, Donald Trump has been re-elected President of the US. Some ...</p>\n\n<a href=\"https://www.livewiremarkets.com/wires/donald-trump-is-elected-president-of-the-us-again-what-are-the-implications-for-investors-and-australia\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"XJO.AU","symbol_name":"标普/澳交所 200指数","start_time":0,"source_url":"https://www.livewiremarkets.com/wires/donald-trump-is-elected-president-of-the-us-again-what-are-the-implications-for-investors-and-australia","article_id":"2481099528","we_media_id":null,"thumbnails":[],"rights":{"source":"livewire_stock","url":"https://www.livewiremarkets.com/wires/donald-trump-is-elected-president-of-the-us-again-what-are-the-implications-for-investors-and-australia","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2481099528","pubTimestamp":1730944474,"sourceInfo":{"source_id":"livewire_stock","name":"Livewire Markets"},"weMediaInfo":null,"summary":"Contrary to what would normally be suggested by the solid US economy, low unemployment, falling inflation and strong share market, Donald Trump has been re-elected President of the US. Some combination of the cost-of-living surge, the immigration blow out, and too much ‘wokeness’ along with various other things weighed against Kamala Harris.Counting is continuing but Trump looks to have secured at least 270 of the 538 electoral college votes and won the popular vote. The Republicans are also on track to regain control of the Senate and, although it's close, looks like retaining the House, resulting in a Red Sweep. Trump’s victory portends a ramping up of trade wars and increased economic policy uncertainty with the high risk of weakening US institutions, democracy and global alliances.Second, expect another ramp-up in trade wars and further deglobalisation – in practice, Trump is likely to target countries with a trade surplus with the U","collect":0,"end_time":0,"defaultTopTitle":"livewiremarkets.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"XJO.AU":"标普/澳交所 200指数","XKO.AU":"标普/澳交所 300指数","XAO.AU":"标普/澳交所 普通股指数"},"translate_title":"Donald Trump（再次）当选美国总统。对投资者和澳大利亚有什么影响？","themeId":"23e66f8003199258d94f232bc05777e0","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"XAO.AU":1,"XJO.AU":1,"XKO.AU":1},"content_text":"Contrary to what would normally be suggested by the solid US economy, low unemployment, falling inflation and strong share market, Donald Trump has been re-elected President of the US. Some combination of the cost-of-living surge, the immigration blow out, and too much ‘wokeness’ along with various other things weighed against Kamala Harris.\nCounting is continuing but Trump looks to have secured at least 270 of the 538 electoral college votes and won the popular vote. The Republicans are also on track to regain control of the Senate and, although it's close, looks like retaining the House, resulting in a Red Sweep. Trump’s victory portends a ramping up of trade wars and increased economic policy uncertainty with the high risk of weakening US institutions, democracy and global alliances.\nTrump’s key policies\n\nTaxation: Trump would make the 2017 personal tax cuts (which took the top marginal tax rate to 37%) permanent (as they expire next year) and cut the corporate tax rate to 20% with 15% for domestic profits.\nTrade: Trump is threatening a big ramp-up in protectionism with a 10-20% tariff on all goods imports and a 50-60% tariff on goods from China. This would take the average US tariff rate on imports from around 2.5% to at least around 17%, a level last seen in the 1930s, and it was a disaster then!\n\n\n\n\n\n\n\n\n\nUS Tariff Duties collected as a % of total imports. (Source: US ITC, Evercore ISI, AMP)\n\nImmigration: Trump will aggressively curtail immigration and is threatening mass deportation of between 15-20 million undocumented people.\nFed independence: Trump would seek to replace Jerome Powell, and his supporters are looking at ways to roll back the Fed’s independence.\n\nClimate policy: Trump will likely reverse the US’ net zero commitments and support fossil fuels (“drill baby drill”). Subsidies for green manufacturing are likely to be replaced with wider support for domestic manufacturing (such as a 15% corporate tax rate on domestic profits and tariffs).\nRegulation: Trump is likely to slash energy and financial regulation.\n\nBudget deficit: The deficit – already huge at 6.5% of GDP - would likely get bigger under Trump by around 2-3 percentage points of GDP.\nKey implications, risks and uncertainties\n\nFirst, there will be fewer checks and balances this time around - Trump’s second term as President arguably faces fewer constraints than seen in his first term as there are fewer anti-Trump Republicans in Congress; there is likely to be fewer “adults in the room” amongst his staff and advisers this time around; and being unable to run for a third term he lacks the political constraints of his first term. \nWorking partly the other way though he is still likely to regard the share market as a barometer of his success and would prefer to see it go up. So this may provide a partial constraint on him.\n\nSecond, expect another ramp-up in trade wars and further deglobalisation – in practice, Trump is likely to target countries with a trade surplus with the US (notably China, Europe and Japan) and rewrite the trade deal with Canada and Mexico. The tariffs may not get as high as he has been talking about and it may be part of a “maximum pressure” campaign to bring production, including by Chinese manufacturers, back to the US. \nThe latter may be the case, but we could go through a lot of disruption as Trump initially ramps up the pressure, resulting in a much bigger impact on share markets than seen in 2018 (where Trump’s trade wars contributed to an almost 20% fall in shares). \nThis time around, the proposed tariffs are much bigger (see the above first chart) and he only backed away in 2019 out of a desire to get re-elected which is not an issue this time around. In any case, Trump has long been a protectionist suggesting his tariff threats may be an end in themselves. And tariff hikes this time around will likely be made worse as impacted countries hike tariffs on US imports in retaliation (with reports Europe is planning to hit back quickly). The net impact will be a further reversal in global trade and globalisation.\n\nThird, expect increased policy uncertainty – this was a key feature of his first term and flows from Trump’s own erratic approach to policymaking. Back to watching the US President’s social media posts!\nFourth, the US is likely to become more polarised, including around how to deal with economic challenges – this was a feature of Trump’s first term and arguably continued under Biden (albeit more mildly). Trump is likely to treat his win as a vindication of his policies and may double down. This could make it harder for the US to reach compromises to solve economic challenges and lead to increased social unrest threatening US democracy.\n\nFourth, increased geopolitical uncertainty - Trump’s re-election may further weaken global institutions and cooperation, resulting in a further deterioration in multilateral cooperation and increased geopolitical uncertainty. For example, his policy to negotiate an end to the war in Ukraine (which could be a short-term positive globally) would almost certainly involve Ukraine ceding territory to Russia which could embolden Russia particularly if Trump weakens or withdraws from NATO.\nFinally, the sequencing of policies may have a big impact on investment markets – if he focuses initially on tax cuts and deregulation then US (and hence global) shares could rally further in response as we saw in 2017. But if he goes early and hard on tariffs then any near-term rally in shares could be brief. His inability to have a third term suggests a high risk of the latter.\nSpecific economic impact of Trump’s victory\nWhile a Harris victory would have meant a continuation of Biden’s policies, Trump is far from the status quo. Put simply Trump’s policies taken together are ambiguous for US growth, negative for global growth and would likely add to inflation.\nHis policies on tax cuts and deregulation could help boost the supply side of the US economy via increased investment in the US resulting in a boost to productivity. However, on balance Trump’s policies – with higher tariffs resulting in higher import prices and less competition (which is bad for productivity), deportation and lower immigration resulting in lower labour force growth (which will lower potential economic growth) and potential moves to weaken the Fed’s credibility – risk adding to inflation and being negative for US growth. His trade policies with a likely global trade war would be negative for global growth.\nThere is also a risk of an even higher US budget deficit when the US public debt is already very high (at 125% of GDP), which will cause a market backlash resulting in much higher bond yields. As noted in the previous section, much will depend on sequencing. If he runs with tax cuts and deregulation first (as in 2017) it could boost shares and the economy in say 2025, but if he runs first with sharp tariff hikes and immigration cuts it could be taken more negatively early on.\nLikely investment market implications\nPut simply Trump’s policies point to:\n\nupwards pressure on US bond yields - via a bigger budget deficit and higher inflation and fewer rate cuts from the Fed;\nupwards pressure on the value of the US Dollar – via higher tariffs, higher than otherwise Fed interest rates and increased global uncertainty;\nUpwards pressure on Bitcoin and other cryptos as Trump is seen as more favourable towards crypto;\nAmbiguity for the US share market with tax cuts and deregulation being positive (driving a short-term boost), but trade wars and higher bond yields being negative (on a cyclical view);\nUS shares outperforming global shares reflecting the tariffs and increased global uncertainty;\nUpwards pressure on US financial and energy shares (less regulation) relative to clean energy shares (as climate measures are reversed);\nUpwards pressure on US small caps relative to large caps including tech stocks (as small caps will benefit most from the lower corporate tax rate on domestic profits and large caps are vulnerable to a trade war).\n\nSome of these moves had already started before the election – with bond yields, the US Dollar and Bitcoin all up over the last month - as a Trump victory started to be anticipated and they have gathered pace in the immediate aftermath (with Bitcoin at a record high). They likely have further to go in the short term but note that this win for Trump is very different to 2016 where his win surprised markets resulting in big market moves. At the time of Trump’s victory in 2016 shares were relatively undervalued and soared 38% into January 2018 as the focus in his first year was on business-friendly tax cuts and deregulation but they fell in 2018 as the focus shifted to trade wars. \nThis time around, shares are already expensive so the upside may be more limited. That said shares may still see further post-election gains on relief that it’s out of the way and hope that he focuses more on tax cuts and deregulation, but this could be reversed if he starts focussing on tariffs and as higher bond yields are bad news for shares.\nHistorically US shares have done best under Democrat presidents with an average return of 14.4% pa since 1927 compared to an average return under Republican presidents of 10% pa. Fortunately, the Republican sweep scenario has been the second-best outcome for shares since 1970. If the Republicans lose control of the House though, Trump will struggle to cut taxes, and this could see less upward pressure on bond yields but be bad for shares as Trump could still do the tariff hikes.\n\n\n\n\n\n\n\n\n\nUS share market returns by political configuration. (Source: Bloomberg, AMP)\nAustralia is vulnerable to a new Trump trade war\nPolls show that only around 30% of Australians would have voted for Trump so many here will be disappointed. And from an economic point of view, Australians have some reason to be concerned. Exports to the US are only 4% of Australia’s total exports and may be spared from Trump’s tariffs as Australia has a trade deficit with the US. However, as an open economy with high trade exposure to China, Australia is vulnerable to an intensification of global trade wars under Trump, particularly if it weighs on demand for Chinese exports. \nAn OECD study showed that Australia could suffer a 1.2% reduction in GDP as a result of a 10% reduction in global trade between major countries. Resources shares would be most at risk and the Australian Dollar would likely fall (and we have already seen a bit of that). Of course, similar fears existed during the last Trump trade war, and it didn’t turn out so bad (although the Australian Dollar fell 10% in 2018 with US tariff hikes and Fed rate hikes).\nAnd there would still be demand for iron ore somewhere – it just may switch from China to elsewhere. Much will depend on how other countries respond and how hard Trump goes.\nThere is also the risk that if Trump’s policies boost US inflation there could be a global flow on, including to Australia, resulting in higher than otherwise RBA interest rates. This is a risk, but I suspect it would be offset by the growth-dampening impact of an intensified global trade war.\nFrom a policy point of view, if Trump cuts the US corporate tax rate to 15% on domestic profits, it could renew pressure on Australia to cut its corporate tax rate. Trump’s reversal of US climate policies will again add to the confusion and may increase pressure on Australia to slow its net zero commitment.\nConcluding comment\nFinally, it’s worth noting that while the US Presidential election is important, many other things impact investment markets, and investors should aim to remain focused on adhering to their financial objectives, ensuring that their portfolios are well diversified across asset classes and geographies and are continuing to take a long-term view. For now, we continue to see central banks cutting interest rates as inflation falls, and this will help share markets.\n\n\n \n\n\nNever miss an update\n\n    Enjoy this wire? Hit the ‘like’ button to let us know. \n    Stay up to date with my current content by \n    following me below and you’ll be notified every time I post a wire","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2481099528"}