{"id":16816,"date":"2024-11-12T16:28:08","date_gmt":"2024-11-12T16:28:08","guid":{"rendered":"https:\/\/theprogenygroup.com\/?p=16816"},"modified":"2024-11-13T11:57:23","modified_gmt":"2024-11-13T11:57:23","slug":"us-election-result-what-does-this-mean-for-markets","status":"publish","type":"post","link":"https:\/\/theprogenygroup.com\/en-hk\/knowledge-hub\/us-election-result-what-does-this-mean-for-markets\/","title":{"rendered":"US election result \u2013 what does this mean for markets?\u00a0"},"content":{"rendered":"\n

After months of speculation \u2013 and plenty of drama in between \u2013 we now know that Donald Trump will be returning to the White House in January 2025. At the time of writing, he has secured well over the 270 electoral college votes required to win the election, and with that he becomes only the second non-consecutive two-term President in US history.  <\/p>\n\n\n\n

Whether or not he has full control of Congress too, with a full sweep of both the Senate (already won) and House (votes still being counted) remains to be seen, and this will dictate the boundaries of power under the next Trump administration.  <\/p>\n\n\n\n

What does this mean for markets?<\/strong> <\/p>\n\n\n\n

Investors will now pore over the details of what a second Trump term may look like – including focus on his trade policies, fiscal expenditure and potential squeeze on labour supply \u2013 all of which is understandable. We have already seen plenty of upward movement across US smaller companies, which stand to benefit from Trump\u2019s more protectionist agenda, whilst other assets such as financials and oil and gas companies have also done well overnight, in the immediate aftermath of the result.  <\/p>\n\n\n\n

By contrast, because of concerns around higher level of government expenditure and less revenue coming in due to a lower tax regime, bond markets in the US had already begun to price this in pre-election, and this only manifested itself further as the result became clearer. With 10yr yields in the US now higher at 4.46% (a function of lower prices), this reflects some concern around Trump\u2019s fiscal discipline.  <\/p>\n\n\n\n

Tuning out the noise<\/strong> <\/p>\n\n\n\n

However, whilst the next few weeks will likely see plenty of \u2018noise\u2019 in the markets, as investors look to interpret his picks for the newly formed administration, the reality is that over the longer-term presidents and parties have historically had very little impact on financial returns.  <\/p>\n\n\n\n

The large-cap US index has had double digit annualized total returns during every presidency, except one \u2013 that exception being George W Bush\u2019s, which coincided with the dot-com bubble burst. Furthermore, that same index\u2019s annualized returns were identical (16.3% per annum) during both Obama and Trump\u2019s presidencies, despite their contrasting policies.  <\/p>\n\n\n\n

As a final reminder, as longer-term investors, it is important to recognise that ultimately it\u2019s those (longer-term) fundamentals that matter more to markets than the outcome of elections, which the below graphic illustrates well.\u00a0<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Source: Dimensional, January 2024<\/em><\/p>\n\n\n\n

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Markets are unpredictable and volatile, particularly in the aftermath of such an important election \u2013 however, sticking to your financial goals and understanding the longer-term strategy has always proven to be the best course of action, regardless of whoever is in the White House.<\/p>\n\n\n\n

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For any queries, please speak to your financial adviser.<\/p>\n\n\n\n

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Charlie Buxton, Head of Investment Consulting<\/p>\n\n\n