US Election Result: What a Trump presidency might mean for your money

With Donald Trump destined to return to the White House in 2025 and Republicans on track to take the US senate, global markets have responded with a surprising jubilance.

Early gains in Asia (not China) were matched across Europe, with the FTSE All Share climbing almost 2% by 10am. The US futures markets are also buoyant - although that’s less of a surprise.

Top risers across Europe this morning

This morning has also seen a surge in the price of Bitcoin to new highs, a strengthening of the value of the dollar against foreign currencies and an upward swing in the 10-year US yield curve.

Why the market response?

Some of this morning’s responses are grounded in the reality of what a Trump presidency will mean for global markets. A commitment to the use of cryptocurrencies, for example, goes some way to explaining bitcoin’s surge. Trump’s protectionist policies around US companies and a commitment to making it harder for the US to trade with China are the driving force behind the strong US futures markets (for both US large and small caps) and a decline in Chinese stocks.

And a rising US treasury yield is a direct response to Trump’s intention to increase the US deficit. His agenda involves material cuts to US taxes, which will decrease US government revenue. But there is no intention to taper spending, so borrowing is bound to increase.

But as for the response of other global markets, those are harder to explain. For a start, Trump’s policy is likely to be inflationary, which isn’t a great environment for any business attempting to sell to consumers. The fallout from rising yields in the US could also cross the Atlantic in time for the Bank of England interest rate decision, scheduled for tomorrow. If rates are not cut in line with expectations, UK markets are likely to react poorly.

It’s also surprising that UK large caps (which make substantial portions of their revenue in the US) are on the rise. Trump has already suggested tariffs of between 10% and 20% on goods sold in the US by non-domestic companies. The likes of Smith & Nephew, Bunzl and Ashtead (which make more than 50% of their revenue in the US market) could see some unpleasant additional costs.

So perhaps this morning’s reaction is more of a respite from uncertainty, than an enthusiasm for the incoming president.

Many market watchers won’t have been expecting such a definitive answer to the question ‘who will be the president of the US from 2025 to 2029’ by the morning of 6 November. With Trump elected and the Republicans gaining control of the senate, we now have a clear picture of what the next few months and years will look like.

When the dust settles, it’s likely that markets will respond more rationally to the actual proposals being set by the new president.

What can we expect from a Trump presidency?

And what might those proposals look like?

For a start, rising tariffs on foreign trade and lower taxes for US companies. The US is Britain's largest export market, with exports reaching a value of £188bn in the year to October. Meanwhile, a rising value of the US dollar could also add foreign exchange costs to the nation’s importers.

Trump has expressed a desire for a tighter relationship with Britain, but proposals include opening up the UK healthcare market to US companies and relaxing animal welfare regulation - both of which are unlikely to go down well with the new Labour government.

Deregulation is also front of mind for the incoming president and the voice in his ear which sounds an awful lot like Elon Musk. Large cap tech companies, which already benefit from a hugely outdated regulatory environment, could keep striding upwards. Although this does come with the caveat of harder trading with China. Most of the US tech companies rely on some degree of back and forth between Chinese companies or the nation’s consumers. Whether deregulation will offset concerns about Eastern trading will be interesting to see.

And then there is climate change, which Trump is not a big believer in. He wants to take the US out of the Paris Agreement and undo Joe Biden’s climate policies, including reducing emissions and the target of 67% electric vehicles by 2032. He plans to massively increase domestic oil and gas production. But commentators reacting to the news this morning have said he’s unlikely to repeal the inflation reduction act (part of which is aimed at increasing the production of domestically produced clean energy) because the bulk of the spending under this policy happens in states controlled by republicans. Meanwhile, Tesla’s Frankfurt-listed shares don’t seem to have been hurt by news of a decrease in EV subsidiaries. They're up 14% in early trading - no doubt supported by Elon Musk’s early hours tweet “game, set and match”.

Finally, there’s defence. Trump has vowed to pull the US out of NATO unless other members increase their defence spending. For the UK, which already contributes 2% of its GDP to defence (which is due to rise to 2.5%), there likely won’t be undue pressure to amp up the defence budget. But geopolitical tensions are unlikely to be eased by the changes afoot in the US, so perhaps defence remains an attractive sector for those looking to profit from a Trump presidency.