Investor Concerns
Thus, although the Republican’s victory was generally welcomed by the stock markets, with the S&P 500 index up 25% in 2024, it has on the other hand aroused more concerns on the bond markets, which fear that his program will not fuels inflation and therefore prevents the American Federal Reserve from lowering its key rate in 2025.
In this context, the yield on US Treasury bills increased from 3.9% at the start of November 2024 to 4.8% in January 2025, which weighs on the performance of the bond markets and the S&P 500 since the start of the year. .
This is causing some unease among international investors who are more exposed than ever to American equity markets, which currently represent 67% of the MSCI All Country index.
A more pragmatic approach than the feared one?
Investors’ concerns are understandable. However, in a country that has overwhelmingly supported Donald Trump, largely due to concerns about inflation and high interest rates, it seems unlikely that the new president will seek to reignite that inflation.
Yet this is what could happen if he implemented his campaign promises without adjustments. For example, average tariffs could rise from 3% to almost 18%, and the reduction in migrant labor would inevitably lead to higher wages in an already strained labor market, with 8.1 million job offers for only 6.9 million applicants.
-Given these realities, it is reasonable to believe that the new administration will need to take a more pragmatic approach than many fear.
Furthermore, these fears should not overshadow the positive measures that the new American administration is preparing to deploy, such as the reduction in corporate tax from 21 to 15% which should boost shareholder returns and support corporate investment. businesses.
This measure, combined with the relaxation of the regulatory framework in certain sectors and the resilience of the job market and consumption, should make American exceptionalism long-lasting. Thus, in 2025, even if interest rates remain high, we anticipate GDP growth of more than 2% in the United States, accompanied by continued outperformance of American stocks, beyond just the sector. technological.
