I had a very memorable 5th November at an event teeming with excitement, happiness, laughter, and a huge amount of pyrotechnics. However, the world will remember it as the day Donald Trump defied the odds once again to become President of the United States of America. Many will be jubilant at the prospect of another four years of ‘making America great again’, while others will despair at the likelihood of making the world a darker and more divisive place. We’ll all be inundated with commentary and analysis over the coming days and so I’ll try and keep this update brief.
Markets have responded positively to his victory with the some of the main global indexes reacting as follows, as of 10.45am:
The market is broadly supportive of a Trump presidency, given his desire to cut taxes and stimulate economic growth. However, I think markets may start to get quite jittery for several reasons. Firstly, Trump’s fiscal stance requires significant amounts of extra debt and the tax cuts he proposes are likely to lead to an uptick in inflation. Coupled with his desire to return to 19th century mercantilism by imposing tariffs on all imports, it leads to the potential for significant cost-push inflation. This, in turn, has ramifications for the future path of interest rates and rationally leads one to the conclusion that they will have to remain higher for longer. That’s not necessarily a bad thing, assuming the economy is strong and growing, but, if the growth doesn’t emerge then stagflation will ensue, which may have significant ramifications for many. The bond market is already pricing some of this in, given that bond prices have fallen, and yields have risen, but there may be more pain to come. Fingers are firmly crossed that we don’t get a colossal American version of the Truss/Kwarteng mini budget.
The other interesting angle of a Trump presidency is the geo-political ramifications, notably surrounding Ukraine, Taiwan, and the Middle East. Trump will likely try to get Ukraine and Russia to the negotiating table for some form of peace to be thrashed out. A positive in the short-term, but the long-term consequences of an emboldened dictator are likely to outweigh the benefits of any peace dividend. The Middle East is likely to remain volatile, and the chances of that subsiding feel even more distant than they did a few days ago. A large part of Trump’s legacy will rest upon whether he leaves the world in a better place than he inherited it from.
Trump is a highly divisive individual, and it is likely to be an eventful four years. Only time will tell whether he brings darkness or light to America and the world. However, for the time being, I’m focussing on the fireworks, and hoping they are what I remember 5th November for.
Dan Boardman-Weston
Chief Executive
06/11/24
