Research

What If Donald Trump Wins Again? Exploring the Market and Policy Implications

Introduction

In light of the upcoming presidential election, there has been widespread speculation about the potential candidates and their impacts on various sectors, including the markets. This analysis seeks to explore the possible return of Donald Trump as the 47th President of the USA and the continuing influence of Joe Biden in the political sphere, assessing their prospective policies and the likely implications for markets.

Current Political Landscape

First of all, as a side note, we consider the odds of Mr. Trump’s returning to the office as well below 50%. Meanwhile, we have seen only limited participation from Mr. Biden in the presidential race. And while it is too soon and too risky to make predictions, we don’t expect any major surprises regarding the race itself.

Review of Previous Administrations

Looking backward, we have to acknowledge that Mr. Trump failed to deliver many expected and promised changes to both internal and external issues. All US Presidents face constraints; even Mr. Biden has broken promises—though far fewer than Mr. Trump. Interestingly enough, one of Mr. Biden’s major failures in delivering the pledge consist of preserving the immigration policy of the Trump’s era —we doubt this will be a target for criticism from Mr. Trump.

Most likely, Mr. Trump will continue his crusade against the Democratic Party regarding the immigration and domestic violence agendas. At the same time, Mr. Biden will focus not on achievements but on the lack of failures and his quite stable reign.

Coming back to the question “What if?” we must emphasize our approach to the US market through the checks and balances of the US version of capitalism. Indeed, the President of the USA is extremely limited in his or her (but historically speaking, his) abilities to transform the system.

Future Speculations

Looking forward, after January 2025, regarding a potential second term for Mr. Trump, we might expect rough rhetoric concerning almost all the less critical issues for Americans, namely:

1. The Outdated Immigration System. Mr. Trump will likely face problems in the fast approval of new laws. The issue is exacerbated by historically low unemployment rates and economic growth, indicating a need for a workforce. Immigrants continue to arrive at the border, driven by the slow and outdated system (e.g., lotteries and long waiting periods).

2. Abortion Rights. This issue, while of extreme importance, is viewed more as a financial and insurance coverage matter rather than a moral one. Women can travel between states for medical care, reflecting the fragmented legal landscape. Nevertheless, the issue is evolving while Mr. Biden is President and almost no financial impact is felt.

3. Foreign Policy. Mr. Trump seems to be very aggressive in his stances on NATO and Russia. While he was President the first time, he was also very aggressive towards allies of the USA (especially Germany and South Korea, whom he blamed for not paying enough for “protection”). At the same time, we consider this issue to be purely technical and financial. In the worst-case scenario, Mr. Trump will force NATO members to increase their expenditures to 2% of GDP and that would be it. Dismantling NATO seems unrealistic because the US Army is historically and fundamentally removed from party clashes and politics. Regarding Russia, Mr. Trump will most likely continue funding Ukraine because ultimately, he will have no other choice.

4. Climate and Energy Policies. Mr. Trump is a staunch opponent of all possible aspects of climate-related issues and he seems to be a huge fan of fossil fuels. These issues are important and have an economic impact. However, we don’t believe this will last more than during one presidential term. Meanwhile, we continue our investments in oil and gas since we strongly believe that this type of energy is far from its end. Even if Mr. Trump promotes the fossil fuel industry, it will be in favor of our investments.

5. Trade Wars. Mr. Trump is likely to start another trade war with Europe. However, we don’t think it will last more than four years and the changes will not be so dramatic. Moreover, we do not have strong belief in the European economy anyway and our investments in European equities are not vast.

Conclusion

In summary, should Mr. Trump be elected as the next U.S. President, we anticipate that the majority of his policies would either benefit or not materially affect our investment strategy. Meanwhile, Mr. Biden’s potential strategies also require careful consideration as they too could significantly impact market dynamics, particularly in healthcare and environmental sectors.

  • 2024-04-16

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