The US presidential election appears to be headed for a clear victory for the Republicans and Donald Trump. Trump has already been declared the winner by the US media. The Republicans were able to gain three seats in the Senate, giving them the necessary majority. That majority in the Senate would mean Trump is immune from impeachment and able to push through his agenda, which includes tax cuts and tariffs. As a reminder, Trump has promised a reduction in corporate tax for companies to 15% if production is made in the USA. In addition, tariffs on Chinese products of up to 60%. There are also signs of a Republican victory in the House of Representatives, although it is still too early for a definitive result.
Market reactions: optimism despite uncertainties
Stock markets, with the exception of emerging markets, rose overnight1. The main driver for this is a clear, non-controversial election result. The decline in emerging markets is likely due to the threat of tariffs, particularly against China. The stock markets could not only benefit from Trump’s surprisingly clear victory and the announced tax cuts for companies, but corporate profits in Europe and the USA in the current quarter are also likely to be stronger than expected2. There is also the prospect of further possible interest rate cuts by the US Federal Reserve and the ECB. Bond prices were already falling before the election and this trend has accelerated3. A possible Republican sweep would likely lead to an even higher US budget deficit and thus rising yields (falling bond prices).
Bitcoin and US Dollar: New highs and short-term support
The Bitcoin price has risen significantly since Trump announced that he would buy Bitcoin as a reserve currency. The US dollar has risen sharply against all other currencies, which we believe represents a slight overreaction. Apparently, the markets are expecting a scenario of higher interest rates and a rising budget deficit, which will support the US dollar in the short term. We will continue to monitor and analyze developments to provide you with informed insights and recommendations. In the coming weeks, it will be crucial to closely monitor the long-term impact of policy changes on global markets.
By Harald Holzer, MBA, CFA, Chief Investment Officer, Kathrein Privatbank
1 (Quelle: Bloomberg, Stand: 6.11.2024)
2 (Quelle: Editor’s note, 4.11.2024)
3 (Quelle: Bloomberg, Stand: 6.11.2024)
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