The new American president is in place. He didn’t waste any time. Unequivocal inauguration speech. Decrees by the dozen. We are far from the hesitations of Trump 1. We already know the program, and it will have an impact on your money.
On the stock market indices, first of all. Trump will do everything to benefit the American economy and businesses. And he is already threatening Europe with retaliatory measures if it attacks the taxation of multinationals in his country. He will also impose commercial deals after issuing threats of taxes and customs duties which will be partially and temporarily implemented. The art of the deal…
This should therefore, in theory, favor investments in American stocks and penalize European or Chinese stocks. In theory only. Because American stocks, and in particular those of tech champions, have already reached stratospheric valuations while the European stock markets – the French in particular – and the Chinese stock markets are far behind and show a historic valuation differential.
So, yes, you will have to continue to fill your portfolio with American stocks, the simplest being to play the S&P 500 index, but without excess. And we can start to build European and Chinese index lines to start a comeback.
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Inflation will continue to fall in Europe.
The impact will also affect interest rates. The consensus is on a “reflation” due to the measures that Trump will take on customs duties, but also due to an investment and consumption boom in the United States. I don’t believe it. Inflation will continue to fall in Europe. And it will follow across the Atlantic. Certainly with a lag.
It will reach a level higher than that of Europe, but it will still fall, thanks in particular to the fall in oil prices. If Trump calls for drilling, “drill, baby, drill”, global production will increase and will more than offset any increase in demand. We will therefore continue to invest in the European and even American interest rate markets.
As for the impact on the dollar, I’ll be honest with you. This is the most complex part of the Trump effect. The president wants to lower the dollar to favor American exports. It won’t be easy, as global capital flows continue to flood the United States, the only country where global companies want to invest. Which favors the dollar. Add to this the impact of rate movements, and you obtain zero visibility on the evolution of the euro/dollar. Come on, I’m getting wet: there is a 50% chance that the dollar will fall, and 50% that it will rise… Impressive forecast, right?
That leaves gold and bitcoin. Gold will continue to attract the central banks of countries who will fear Trump’s angry attacks and sanctions on their dollar holdings. As for bitcoin and cryptocurrencies, Trump is a fan, as is Elon Musk. But I will be careful not to make predictions on an asset that I still do not understand. Trump will therefore be a game changer for your money. Up to you.
