An investor's guide to a Trump White House

"Not another election pod," I hear you cry. Don't worry, we don't dwell on the ins and outs of the result. This pod is purely about what the outcome means for investors.

Listen to Adam Farstrup, Head of Multi-Asset for the Americas, and George Brown, Global Economist, give their verdict on what investors should expect.

RUNNING ORDER:

01:07 - Part one: the investor's verdict on the Trump win

05:49 - Part two: how it will affect the global economy

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Episode Transcript

(00:00):
Welcometo the Investor Download, the podcast
about the themes driving markets andthe economy now and in the future.
I'm your host, David Brett.

(00:23):
Hi, everyone.I hope you're all well.
You might have heard, but just in case youdidn't, there will be a new President, or
at least a returning one, in the WhiteHouse come the end of January in 2025.
So we thought it would be a good idea totackle some of the questions facing
investors as and whenDonald Trump takes office.

(00:45):
This is a bite-sizedpodcast in under 10 minutes.
Hosting this show is my colleague,the excellent Michael Worrall.
He'll be posing your questions to GeorgeBrown, Schroders' Global Economist, and
Adam Farstrup, Head ofMulti-Asset for the Americas.
The first voice you'll hear is Michael's.
Enjoy the show.

(01:07):
After months of being too close tocall, in the end, it was definitive.
Donald Trump won a second term and willbecome the 47th President
of the United States.
Winning both the Electoral College and thePopular vote gives him a significant
mandate to push many of his policiesthrough Congress and into law.
With the Electoral Map redrawn, todaywe'll discuss what the result means for

(01:28):
both the US and global economies and forinvestors over the next
four years and beyond.
With me in the studio in London todayis our global economist, George Brown.
And joining us all the way from New YorkCity is Adam Farstrup, head of
multi-asset for the Americas.
Adam, we'll come to you first.
Immediately after the result, we sawequities rally, the dollar

(01:49):
strengthen, and treasury sell off.
All this at a time when concerns remainabout the state of the economy
and interest rates are falling.
Why did things play out like that?
Well, I think the The first thing iswe were coming to this conclusion that
we're really in a soft landingin the US at this point.
And so the markets have already beenlooking to what's the next phase of that.

(02:11):
With Trump's convincing election, whatyou're seeing, of course, is the consensus
Trump trades really reacting in theimmediate aftermath of the election.
So we've seen, as you've said, equitiesrallying very strongly on an expectation
that Trump's policies will continue tosupport the growth agenda,
the growth of the US economy.

(02:33):
We've seen small caps themselves rally.
We've seen financials rally,all reflecting some of the agenda that
Trump has put out as partof his election campaign.
We're also seeing a strength in the USdollar on the back of that expectation for
growth, supporting higherinterest rates going forward.

(02:53):
In the immediate aftermath of theelection, we saw US rates jump
sharply higher as an expectation that notonly growth would continue, but that
perhaps Fed policy would notbe able to be as accommodative.
We've seen that back off a little bitin the following days from the election.
We'll have to see how that plays out.

(03:13):
Of course, we've seen Bitcoin surging onan expectation that Trump's policies
towards crypto and technology will be muchmore friendly than what we saw
in the Biden administration.
When we turn the lens outside the US, whatwe're seeing is, I think,
question marks across Europe.
So European equities have been down alittle bit, but not as much as

(03:36):
perhaps people would have feared.
And then we've actually seen a sharp rallyagain in China, I think, partially on the
back of the renewed policy efforts thatwe're seeing from the Chinese government.
So further stimulus coming out in therecent days, being announced by the
Chinese government, but also perhaps anexpectation that direct negotiations
between the US and China might lead tosome greater clarity

(04:00):
in how things play out.
What does that tell us then about howinvestors view the election result, and
how do you think that might playout over the next four years?
I think it's very clear that Trump isgoing to pursue a pro-business policy.
He's going to want tosupport growth directly.
He's going to want tosupport US jobs directly.

(04:21):
We are expecting him to push through withunified control of Congress, a full
renewal of the Trump tax cuts, andperhaps even more more than that.
So we may see further expectations of taxcuts or policy changes supporting that.
We think you're going to see someexecutive moves around

(04:44):
tariffs quite quickly.
He's been clear about that in the daysfollowing the election that he
will pursue the tariff policies.
Now, the markets are looking to see,will that be a negotiating tactic?
And ultimately, the tariff will be ashigh as pitched in the campaign itself.
But we do expect to see some pretty strongtariffs on the back of that as well.

(05:06):
And then deregulation.
Again, Trump has said day one, he wantsto pursue some aggressive deregulation.
I think that's part of whatyou're seeing in the crypto area.
It is part of what you're seeing certainlyin financials, where there's a very clear
deregulatory agenda on the back of supportfor Wall Street and getting, in Trump's

(05:27):
mind, I think liquidity into the economy.
We've already had a lot of liquidity intothe economy, but he wants to further
support that and make sure that thoseplayers are able to deliver that.
On Apple Podcasts, Spotify, or whereveryou get your podcasts, you're
listening to the Investor Download.

(05:49):
George, all the things that you've justheard Adam talking about, how did they
affect the economic outlookfrom your perspective?
It's a great question.
I think, like Adam said, we don't know theextent to which Trump is going
to implement these policies.
But clearly,there's going to be some inflationary
impact, and we think there's goingto be a growth impact as well.
We think that it's going to be pushingup on inflation and pushing up on growth.

(06:12):
Obviously, that's got implicationsfor interest rates as well, of course.
For the Federal Reserve, for some time, wedid find it quite unusual that they
started off with quite an aggressive ratecut, at least at the start
of their easing cycle.
And arguably now with Trump being electedPresident and with this red sweep looking
likely, the implication of that is clearlygoing to be pushing the US in a

(06:34):
reflationary direction, and it gives usgreater conviction that the Fed isn't
going to be delivering all the rate cutsthat it had been suggesting
that it would previously.
We saw Trump flip some states.
He won all seven swingstates quite convincingly.
What does that say to you about not onlythe four-year second term, but the US
economy beyond that and the policypositioning that could be lining up?

(06:56):
I guess it determines about...
The question will be, That as people dothis post-mortem on this election, what
was the drivers of whypeople voted a certain way?
Was it that Trump made a very convincing,strong economic argument, or was it
that Harris failed to deliver hers?
Now, we don't really know.
That will only become apparentin the months and years to come.

(07:16):
But certainly it looks like Trump might bepushing the politics
to a structural shift.
It's likely that Democrats will look atthis result and they might feel that they
have to move themselves morein into Trump's direction.
Certainly, you could see some morepopulist policies from the Democrats.
You'd imagine maybe in the next electioncycle, perhaps even in the midterms, that

(07:38):
would be a good litmustest maybe for that.
Certainly, we could be seeing a structuralshift here in terms of politics.
That has big implications in termsof inflation, growth, but also, of course,
the budget deficit aswell as a consequence.
Adam, for the longer term investor, doesthat mean that investors should be

(07:59):
thinking now about 5, 10 years ahead,or is it a case of wait and see?
Well, I think what is clear in the wake ofthis election,
and this is consistent with what we haveseen all around the world over the course
of 2024, is a dramatic reaction fromvoters everywhere, where you've seen all

(08:20):
of the incumbent partiesreally thrown out of office.
I think this is what this is telling us.
We're living in an era of disruption,where people are feeling uncertainty.
They're feeling concernedabout their place in the world.
And so politicians andpolicies will react to that.
And I think that's going to take a muchmore active approach to

(08:43):
risk management in that era.
The idea that we can simply take ourassumptions of the past and fit them
to the future is no longer true.
So this era of disruption,we think there's opportunities, and we
think there are risksthat investors can capture, but we need to
very carefully follow the actual policiesthat come out of these governments

(09:05):
to take advantage of that.
Thank you both very much for allof your wisdom and expertise today.
As ever, George, Adam, and our expertswill be keeping you updated on what's
going on in the US and around the world.
You can keep up to dateon Schroders Insights.
That was the show.We very much hope you enjoyed it.
You can subscribe to the investordownload wherever you get your podcast.

(09:28):
And if you want to get in touch withus, it's schroderspodcasts@schroders.
Com.
And you can find out much,much more at schroders.
com/insights.
New shows drop every otherThursday at 05:00 PM UK time.
In the meantime, keep safe and go well.
The value of investments and the incomefrom them may go down as well as up.

(09:50):
Investors may not get back theamounts originally invested.
Past performance is not aguide to future performance.
The information is not an offer,solicitation or recommendation of any
funds, services, or products, orto adopt any investment strategy.