Tax policy, energy issues and volatility mark investors’ agenda after the election.
With the return of Donald Trump to the White House, the United States is poised to experience a clear change in political and economic priorities. The Republican Party has regained control of the Senate and is aiming for a narrow majority in the House of Representatives. Central questions therefore arise in the world of finance: how do markets react and what strategic adaptations should investors make?
Even before the election, expectations about Trump’s economic policies had financial markets moving. Rising bond yields reflected expectations that tax and trade measures could support the domestic economy, while increasing inflation risks. In equity markets, sectors that expect tax relief and a reduction in regulatory burden have benefited the most. Despite these developments, volatility remains a central theme. In addition to tax reforms and tax policy conflicts, geopolitical uncertainties could continue to be stressors. Clarity on the political orientations of the new government could, however, lay the foundations for a gradual calming of the market.
High yield bonds, senior loans and securitized assets, in particular, offer attractive income opportunities.
In a context of rising yields, fixed income investments are coming back to the forefront. High yield bonds, senior loans and securitized assets, in particular, offer attractive income opportunities. Municipal bonds also appeal with their solid fundamentals and attractive valuations.
The still young asset class “Private Credits” benefits from strong investor interest and a growing transaction volume. For investors who have until now relied on significant cash reserves, current market conditions could encourage them to position themselves in a more yield-oriented manner.
A political agenda with economic significance
Tax policy is expected to play a central role in Trump’s second term. An extension of the 2017 tax cuts is on the agenda, as is a reduction in the corporate tax rate by up to 15%. At the same time, tariffs could be reintroduced, which would strengthen domestic producers but could push up inflation. For investors, tax-optimized investments remain an important part of portfolio planning. Strategies such as loss compensation and investments in municipal bonds could become more important.
Historically, divided government – that is, different majorities in Congress and the presidency – has proven stabilizing for financial markets. Lockdowns make comprehensive tax and spending reforms difficult and thus dampen potential inflationary impulses. In contrast, unity in government has often led to rising deficits in the past, as examples from Trump’s first term show.
With growing budget deficits and a looming debate over the debt ceiling, bipartisan solutions may be necessary to ensure fiscal stability.
Adaptation, key to success
A change in political leadership will also have sectoral repercussions. Companies in the financial, energy and healthcare sectors could benefit from deregulated policy, while green energy companies could face headwinds. However, the global momentum towards renewable energy remains intact. Solar and wind energy as well as investments in agricultural land to support the energy transition are expected to continue to grow in the long term. Traditional energy sources such as natural gas and nuclear power also play a central role, especially given the high entry costs of renewable technologies.
For investors, the changing political and economic landscape means that portfolios must be adapted to the new context. Diversification, tax optimization strategies and a targeted focus on high-growth segments could prove decisive in minimizing risks and seizing new opportunities.
