How Trump’s Return to the White House Could Impact Your Investment Portfolio

Donald Trump has made a political comeback, winning the 2024 U.S. presidential election as the 47th president. His victory comes alongside a Republican-led Senate, with a strong likelihood of Republican control in the House. This new administration can potentially reshape and influence global financial and investment markets, impacting investors worldwide.  

We can now expect a range of measures and how they may shape financial markets and various asset classes. 

The Trump administration’s policies are likely to include: 

• Increased Government Spending: A higher level of government (fiscal) spending, higher government debt and higher bond yields, 

• “America First” Trade Policies: A US centric approach with extensive use of trade tariffs, and 

• Lower US Corporate Taxes: Beneficial for US businesses and investors. 

These policies are expected to drive up bond yields, strengthen the U.S. dollar, and increase inflation in the short term.  Our Morrows Private Wealth Investment Committee has prepared their view of the implications for each major asset class. 

Asset Class Outlook 

• Bonds: Restrictive trade and loose fiscal policy are expected to be inflationary and result in higher yields, which is typically a negative for listed fixed-income investments given that the price and the bond yield have an inverse relationship. The long-term outlook is more uncertain. However, higher yields for an extended period are a possibility. 
• Private Credit: Higher cash rates and lower taxes should be positive for private credit, as yields will remain elevated, and debt serviceability should improve. Given room for growth in the asset class, the long-term outlook for private credit is positive.
• US Shares: US corporates should benefit from tax cuts and government-stimulated activity, providing a positive backdrop for listed equity markets in the short to medium term. Smaller companies may perform better relative to larger companies, as improved sentiment often entices investors to move into the smaller part of the equity market (particularly rotating out of the ‘Magnificent Seven’ mega-cap stocks such as Apple, Microsoft, Amazon, Alphabet (Google), Tesla, Nvidia and Meta Platforms.). 
• Australian Shares: The outlook is less certain (due to a high weight of resources in the Australian share market), given we have a close relationship with the USA (and therefore may avoid high tariffs) and a larger reliance on the continued growth in China (which are expected to be higher).
• Emerging Markets: Emerging markets may underperform due to certain key drivers. One major driver is the expected strengthening of the US dollar, which could increase financing costs for companies in these markets. Additionally, emerging markets may be affected by lower global growth due to restrictive trade policy. 
• Global Shares: Other developed market shares may also underperform as trade tariffs are implemented, reducing the outlook for global growth in the medium term. 
• Private Equity: The private equity market may appear to underperform in the short term, due to delayed pricing relative to listed equity markets. However, the factors supporting private equity are similar to listed equity (lower taxes, increased government spending), which provides a positive outlook for private assets.    
• Commodities: Some commodities, such as copper, may underperform as US-centric trade policies could restrict global growth and increase construction costs. Investor optimism may reduce demand for ‘safe-haven’ assets such as gold. Given a more positive regulatory outlook, energy (oil and gas) will likely outperform in the short term. 
• Real Assets (Property and Infrastructure): Higher inflationary environments typically see real assets outperform as they can pass on inflation increases, providing a hedge to rising costs. The long-term demand for infrastructure remains appealing, given the ongoing energy transition and the boom in data centres to support Artificial Intelligence (AI).

Any questions on how this may impact your portfolio?

If you have any questions about how these developments may affect your portfolio, please contact your Morrows financial adviser.