Trump’s landslide win will give him the opportunity to implement his policies, which could lead to return to a pick-up in inflation and provide a small boost to growth.
Donald Trump’s unexpected emphatic US presidential election victory has jolted markets into action, fuelling immediate optimism, while raising questions about long-term economic and geopolitical implications of his return to the White House.
Mr Trump performed much better than expected in the key “swing” states, while Republicans have retaken control of the US Senate. They also lead the contest to control the House of Representatives.
The results defied expectations, with many pollsters forecasting a far closer contest. Securing Pennsylvania, a pivotal swing state on the road to the White House, solidified Mr Trump’s position, leaving markets to grapple with the implications of his remarkable victory.
“Trump’s landslide victory will give him the opportunity to apply his programme with free hands,” says François Savary, former chief investment officer at the Geneva-based private bank Reyl, now running his own wealth management firm, Genvil. “This will nevertheless be constrained by the important budget deficit in the US and the issue of public debt, that could grow by $8tn over the coming 10 years,” he adds.
Experts stress that people should not focus too much on what the Democratic party should have done to win.
“The ultimate realisation that should come from this election is overwhelming clarity of what the majority, or at least the plurality, say they want the country to be: Trump’s clearly articulated vision of an isolationist, xenophobic, white America,” says Kyle Taylor, executive director and founder at Fair Vote UK and commentator on US politics. The business world and society must “wait and see whether the lived reality matches voters’ expectations, and in the meantime, we must simply watch it all unfold”, he believes.
Market reaction
As the results rolled in, markets reignited the so-called “Trump trade”, driving the dollar and US yields sharply higher. The US 10-year Treasury yield climbed 20 basis points during the Asian session as election results pointed to a potential Trump victory, marking its largest single-day gain in more than two years.
“We anticipate an inflationary impact from most of Trump’s policies, which should also deliver a small boost to growth,” says Samy Chaar, chief economist at Lombard Odier in Geneva. This means the Federal Reserve will likely limit interest rate cuts in response.
US stocks have proved the most significant early beneficiary. “For what might lie ahead, our analysis of past US elections shows the impact on asset prices usually starts to fade after a couple of months,” says Arun Sai, senior multi-asset strategist at Pictet Asset Management.
However, there are some areas where Mr Trump’s policies will likely have a longer-lasting effect. “His plans to increase tariffs on imports from China and elsewhere would result in a meaningful but not extreme hit on US earnings of about 7 per cent, some of which would be offset by potential tax cuts,” he says.
Others view the tariffs from a different lens. “When it comes to tariffs, it appears to be more of a bargaining element than something automatically implemented,” says Genvil’s Mr Savary.
The proposed Republican policy platform prominently features significant tax cuts, though these essentially represent an extension of existing measures rather than a radical departure. For instance, the corporate tax rate, reduced to 21 per cent during Mr Trump’s previous administration, was set to expire in 2025.
A second Trump presidency would likely see this lower rate extended indefinitely. Similarly, while the imposition of tariffs marked a significant policy shift under Mr Trump, their continuation — and even expansion — under President Joe Biden underscores the degree of bipartisan alignment on trade protectionism.
The lack of detailed policy proposals is not a new or unique feature relating to Mr Trump or any other incoming US president. Still, there is the potential for more volatile decision-making than if Mr Biden or Kamala Harris had won.
Among more concrete proposals, Mr Trump expressed a desire to revise the US’s relationship with Nato, address conflicts in Ukraine and the Middle East, and end asylum-seekers’ privileges. He also advocates for stricter immigration policies and enhanced border controls.
Bitcoin boom
Bitcoin has also rallied. After years of scepticism, Mr Trump adopted a markedly warmer tone on cryptocurrency during this year’s campaign. Speaking at the bitcoin conference in Nashville in July, he floated the idea of creating a federal bitcoin reserve and underscored the strategic importance of expanding bitcoin mining operations within the US.
The crypto community is feeling optimistic. “We crypto actors have to pinch our arms to make sure we are not dreaming,” says Oskar Åslund, chief strategy officer at AKJ Group, a brokerage, hedge fund specialist and digital assets firm.
“An SEC under new leadership, providing regulatory clarity rather than regulation by enforcement? Serious talk about the US building a strategic BTC reserve? Santa Claus is truly coming early this year, and he’s got an orange tan,” he adds.
With institutional actors now “deeply” engaged in the industry, increased tokenisation of financial assets, and widespread use of stablecoin payment rails, the distinction between crypto and traditional finance may become increasingly “blurred,” heralding a “new” stage for growth.
