In a presidential race that always promised to be tight, it appears that Donald Trump has secured the 270 electoral college votes needed to win, and is set to re-enter the White House as the US’s 47^th president. 

So what does this mean for global markets in the immediate and longer term? We asked UOBAM’s Head of Multi-Asset Strategy, Anthony Raza, for his views.  

Are you expecting any near term market moves as a result of Trump’s win?

Tony: In the past couple of weeks, markets had been partially anticipating that the Republicans will sweep the presidency and congress and thus have significant control to pass their agenda of tax cuts, tariffs, and anti-immigration policies. 

All three of these policies are perceived to be inflationary and in the short to medium term,  we are expecting a mixed impact on equities and bonds. While markets expect such policies to stimulate growth and boost equity markets, there is also concern that this could be partly offset by fewer interest rate cuts. Bond markets can be expected to react more negatively to a potential pick-up in inflation, and in fact, had already turned more volatile in the run-up to election day.

Overall, we expect this Trump victory to have a neutral or slightly positive short term effect on equity markets, but to trigger further weakness in bond markets.

What are you expecting from the Fed at its Nov meeting and going into next year?

Tony: Despite the Trump victory, we would expect the Fed to stay on course and proceed with expected cuts at its November and December meetings this year. 

However, we think the Fed will be closely monitoring how quickly Trump is able to roll out his policies.  If tax cuts are implemented quickly, which is possible given that the Republicans now have a majority in both the Senate and House of Representatives, and therefore have control of Congress, then we think the previously-anticipated pace of rate cuts will change. 

Several weeks ago, before the increased likelihood of a Trump win, markets were pricing in four more rate cuts in 2025, assuming cuts in November and December.  The expectation just before election day was adjusted down to three more cuts. With this Trump win, the number and pace of rate cuts could get reduced further.

What is the likely medium term market impact of Trump’s policies?

Tony: It will take time before the effects of Trump’s policies on immigration, tariffs and taxes are seen in the broader economy. 

We would expect markets to anticipate the inflationary effects of these policies but discount it somewhat, as the timing and scope of such policies are difficult to pin down. As such, it would be fair to expect somewhat limited pressure on yields until the impact on inflation and interest rates is seen more clearly over the coming year.

On the other hand, we would expect a fairly quick implementation of Trump’s intention to impose higher tariffs on US imports. This would likely result in trade uncertainty and lower business sentiment in the US.  Given that capital and intermediate goods make up over 50 percent of US imports, these tariffs could increase production costs across many sectors within a relatively short time scale.

However, our base case view for the macro economy under a Trump administration is continued growth at a moderate pace. Consistent with our “higher for longer” paper, we think there is risk to bond prices, but we do not expect bond yields to rise drastically. 

How are you expecting this win to impact Asian markets in the short and longer term?

Tony: Despite the US’s membership of multilateral trade treaties and organisations, the Executive Branch maintains powers to institute tariffs and other protectionist measures. As such, tariffs can be implemented with little/ limited time lag. Not surprisingly, the US’s trade with China would be most impacted, followed by Japan, Vietnam and Taiwan.

In terms of market performance, during the trade disputes in Trump’s first presidency, Asia underperformed global equity markets. We would expect North Asian markets like China, Hong Kong, Taiwan and South Korea to see the biggest effects of higher US tariffs, especially in the technology and capital goods space.

On the other hand, the outlook for Asia is attractive if Trump’s tariffs are more restrained than expected.