Donald Trump’s decisive victory in the US election also gave the Republicans a clean sweep in the senate and house. Uninhibited, little can prevent the Trump administration from implementing its far-reaching plans.
Markets rallied when Trump’s victory was announced. The S&P 500 enjoyed its best weekly performance in a year. And Fidelity likened the reaction to the markets declaring a joyous “bring it on”.
Trump’s pledges and plans for the US
During the electoral campaign, Trump focused a great deal of attention on the economy, with promises to “end inflation”, cut taxes and interest rates, reduce immigration, and impose tariffs on imported goods.
Trump may instigate cuts to individual, corporate, and Capital Gains Tax rates. If meaningful reductions materialise, individual investors and businesses could both benefit.
In particular, Republicans have proposed decreasing the Corporation Tax from 21% to 15%. Yet, this change could be tempered by the proposal to place a 60% tariff on goods from China and a 10% tariff on imports from the rest of the world.
Business leaders running companies that make their products in the US relish Trump’s desire to slash Corporation Tax. If this comes to pass, the significant tax reduction could mean those companies will have more money to grow their business or pay out higher dividends, causing markets to rally.
Though the opposite may be true for companies selling imported goods.
The truth behind Trump’s trade agenda is still unclear, but should tariffs rise, it could create higher risk for investments in US companies that manufacture goods elsewhere in the world.
Deregulation could be a major theme
With a clean sweep in the senate and house, Trump should benefit from a clearer path to remove regulatory burdens inflicted on many areas of business.
Sectors that may welcome fewer obstacles include energy companies.
For example, oil and natural gas producers are likely to benefit from deregulation. By lifting the pause put in place by Biden’s administration on natural gas permitting approvals, energy companies could enjoy swifter approval timelines and easier permitting processes.
Financial services could also see reduced regulatory burdens. This would potentially boost the banking sector and boost M&A activity.
That said, certain sectors might face increased risks. The clean energy sector, for instance, could suffer if clean-energy tax credits are rolled back. And electric vehicle companies, and related infrastructure, may see less federal support, impacting growth in the sector.
A high-level summary of potential pros and cons of a Trump administration for investors
While we await precise details of the changes we may see under a second, potentially less impeded, Trump administration, it's highly likely that it will lower taxes for individuals and businesses and cut regulation.
The primary positive for investors is that lower levels of taxation and regulation are usually good news for stock markets. It should mean those living in the US will have more money to invest while companies will keep more of their profits.
Conversely, lower corporate taxes and deregulation may favour traditional sectors like fossil fuels and heavy industries.
While this may benefit specific companies within these areas, it might also create geopolitical uncertainty, especially when it comes to trade policies.
As is so often the case, timing is key. The order and timing of policy implementation will be critical to ensure that any growth-stimulating efforts, think deregulation and lower taxes, are not completely offset by disruptive and inflationary actions – such as US price-raising tariffs, immigration curbs that slow employment growth and wage disinflation.
Holding a well-diversified portfolio could help you profit from more growth
The US makes up over half of the global stock market. It’s the world’s biggest economy and home to some of the globe’s largest companies.
As such, it can be easy to inadvertently hold a portfolio of investments of US company shares. President-elect Trump will be sworn in to commence his official role in the White House on 20 January 2025.
Between now and then, it may be appropriate to review your investment portfolio to ensure you’re well-positioned to potentially profit from the incoming changes the new administration may take, and protect yourself from losses.
The key point to remember is that your portfolio should be tailored to your goals. And always invest with a long-term horizon – ideally five years or more.
If you’re thinking of making an investment adjustment, we are here to discuss your concerns and goals and help ensure you stay on the right track.
Tune out the noise, focus on your financial goals, and stick to your long-term investment strategy
Stock market volatility is part and parcel of investing, and a well-balanced portfolio is designed with this in mind.
So, regardless of your view of Donald Trump and his second term as US president, your best approach is focus on the long-term horizon.
Placing your trust in a personal financial plan designed around your needs and financial goals can help you maintain a consistent strategy and avoid emotional reaction to external events.
We can help you put financial headlines into perspective and take an objective look at the market data that is relevant to you.
Remember, your long-term investment strategy and personal financial goals are paramount.
Get in touch
If you’re concerned about how Trump’s policies might affect your investments, or wish to discuss your financial plan and explore the potential for greater investment growth and improved tax-efficiency, please get in touch.
Email enquiries@alexanderpeter.com or give us a call on +44 1689 493455.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
