Market Views: Top 3 assets poised to gain if Trump wins
Global traders have been warily positioning for Donald Trump’s re-election, fuelling the “Trump trade” in recent weeks.
Financial markets expect higher inflation, steeper trade tariffs, looser fiscal policy, weaker regulations, and heightened geopolitical uncertainties under a Trump administration and Republican-controlled Congress.
However, incumbent president Joe Biden's exit and vice president Kamala Harris's likely nomination as the Democratic candidate have injected uncertainty into the race, potentially boosting the odds of a Democratic victory.
The market's reaction to the development has been somewhat limited, with the Trump trade largely sustained. This trend is marked by higher long-term US Treasury yields, a stronger US dollar, a weaker Mexican peso, a rally in bitcoin, and gains for bank stocks.
As the US Presidential election inches closer, we asked asset managers and strategists to identify the top three assets that could benefit from a potential Trump win.
The following responses have been edited for brevity and clarity.
Cui Xiao, senior US economist
Pictet Wealth Management
We expect Trump’s policies on taxes, trade, and immigration to be more inflationary than those of a Democratic president. Macro uncertainty also rises under Trump, as the range of outcomes is wider.
In the case of a Republican sweep, the Federal Reserve could cut the Fed fund rate only to 4% by end-2026 from 5.5% currently, which is largely in line with current market pricing.
Nevertheless, we could see the 10-year US Treasury yield rise from 4.26% (on July 25) towards 4.9% by end-2025, as a number of factors (among them, a sustained increase in the US fiscal deficit) point to a structural rise in the 10-year term premium from its current low level.
On the equities front, a Republican victory should favour US stocks over their global peers given the prospect of additional tariffs and a stronger US dollar.
We see less US election risk for Japan than either Europe (more sensitive to trade restrictions) or emerging markets (negatively exposed to stronger US dollar).
In the case of a Republican clean sweep, the US dollar will likely strengthen significantly, mostly due to the imposition of wide-ranging tariffs (though the net effect of these will depend on any retaliatory measures adopted by the US’s trading partners).
Our belief that equity markets would continue to perform well under a Trump presidency is likely to bolster sentiment towards the US dollar.
Finally, the prospect of sustained re-shoring, increased capital expenditure and a manufacturing revival provide fundamental support for the US dollar in the medium term.
Adrian Zuercher, co-head global asset allocation & co-head global investment management APAC
UBS Global Wealth Management Chief Investment Office
We assign a 40% probability to a “red sweep” scenario of a Trump victory with a unified Congress.
Top three assets to benefit from a Trump win:
In the case of equities, US and Europe financials may stand to benefit from a more relaxed regulatory environment in a “red sweep” scenario.
In Asia, we expect Japanese and Singaporean banks to do better under a Trump win.
In the case of bonds, with US inflation continuing to recede, the Fed appears on track to start easing policy in September.
In our base case, we see the 10-year US Treasury yield declining to 3.85% by the end of the year.
To prepare for lower interest rates, we recommend shifting cash into high-quality bonds, which offer attractive yields and the potential for capital appreciation as interest rates fall.
With foreign exchange and commodities, it is worthwhile taking some action to hedge political risk - we like the safe-haven Swiss franc and have a most preferred view on gold.
We think gold can act as an effective hedge against fears of geopolitical polarisation, inflation, or excessive deficits.
In our base case, we forecast gold prices to rise to $2,600 per ounce by the end of the year and $2,700 per ounce by mid-2025.
Swarup Gupta, industry manager and lead analyst, financial services
EIU
Large-cap tech stocks, specifically the ‘Magnificent Seven’, cryptocurrencies, and gold are the three assets that would gain unequivocally if Trump secures a second term as US president.
The MSCI World Index rose by 50% during Trump’s first term which is partially attributable to some of his policies, such as tax cuts and deregulation, even when accounting for the post Covid-19 equity rebound.
Large tech companies are likely to gain substantially if Trump comes to power and would benefit from any deregulation he announces.
Trump has also changed his stance on cryptocurrencies, ascribing this to JP Morgan CEO Jamie Dimon’s conversion from crypto sceptic to stablecoin proponent.
His vice presidential pick JD Vance is a crypto champion and a second Trump term could see significant deregulation of the sector and even the creation of a US strategic bitcoin reserve.
Such moves would boost the prices of cryptocurrencies, especially stablecoins tied to the US dollar.
Gold prices are also likely to rise next year and could gain from some of Trump’s foreign policy initiatives that raise global uncertainty, such as harsher tariffs on China.
The EIU forecasts that the Fed and the European Central Bank will continue to lower interest rates next year, and therefore expect gold prices to increase from $2,312 per ounce in 2024 to $2,498 per ounce in 2025.
Demand will remain strong on the back of central bank and retail purchases.
Gary Dugan, chief executive officer
The Global CIO Office
US equities: A Trump presidency is expected to result in cuts to personal and corporate taxes and significant deregulation, boosting corporate profits and US equities.
If a Trump win becomes more likely, equities are expected to rally further in anticipation of these pro-business policies.
Trump has been a strong supporter of the fossil fuel industry, advocating for increased investment in oil exploration and production.
His administration is expected to support projects such as pipeline construction and expanded drilling.
A Trump presidency could potentially also lead to increased geopolitical tensions.
Comments suggesting reduced support for Ukraine and Taiwan, as well as possible confrontations with countries like Iran, could elevate global investor anxiety.
Gold typically performs well during periods of heightened geopolitical risk, as evidenced over the past two years.
Alicia García Herrero, chief economist, Asia Pacific
Natixis CIB
Go for mid and small-caps, even if leveraged.
Rates will go down in the US and Europe and these companies are bound to benefit.
For Asia, this is less the case since you don’t have enough mid-caps listed and liquidity constraints may remain, especially in China due to a growing liquidity gap which hurts small companies much more than big ones.
Go for generic goods and forget about tech for a while.
There is over-investment in tech in Asia (China, Korea and Taiwan). Artificial intelligence will prove to be less of a hit for many reasons, including resource constraints and there is already huge excess investment in legacy chips.
China and Malaysia are going to suffer the most, followed by Korea.
Japanese markets could have a second good year as the yen continues to appreciate due to the unwinding of carry trades and Japanese investors repatriating funds back home.
Ray Sharma-Ong, head of multi-asset investment solutions, Southeast Asia
abrdn
Whether we will get looser US fiscal policy will depend on the makeup of the Congress.
A red wave in Congress will facilitate the extension of the Tax Cuts and Jobs Act of 2017. A split Congress will likely result in the expiration of the 2017 tax cuts.
Should the trade conflict escalate under a Trump administration, we favour India equities and defensive stocks such as Asia REITs [real estate investment trusts].
India has low export-to-GDP ratio exposure and a tilt towards services exports, which isn’t the target of Trump’s tariffs.
REITs are less exposed to trade risks and stand to benefit from a lower-rate environment.
Given the uncertainty on whether the 2017 tax cuts will be extended, US treasury yields are likely to remain elevated. As such, within Asia our preference is to allocate to regions with idiosyncratic drivers that will drive performance.
India sovereigns is our top pick, as we expect India bonds to benefit from bond index inclusion, a factor that is not dependent on the fiscal deficit outcome, and yield of US Treasuries.
Eli Lee, chief investment strategist
Bank of Singapore
There are four main trades financial markets have favoured in anticipation of a Trump victory.
First, inflation, Treasury yields, and the US dollar are expected to rise as fiscal, trade and immigration policies would shift sharply.
In addition, the US yield curve would steepen if Trump were to pressure the Fed to keep interest rates low in future.
Second, equities may benefit from the prospect of lower taxes and regulation during a second Trump term. But the risk of higher yields could hurt stocks.
Third, increased uncertainty would support gold given fears over the ‘rule of law’ in the US and Trump’s stance on Ukraine, Taiwan and NATO.
But unless the polls shift more sharply against Trump, we expect US yields, the US dollar and gold prices to stay firm.
We thus continue to see 10-year Treasury yields at 4.25%, gold reaching $2,500 per ounce and believe investors should be neutral now on fixed income given the uncertain US political outlook for the rest of 2024.