Donald Trump’s election victory has prompted a volatile session in global markets. The dollar surged, sending the euro and emerging market currencies down; the S&P 500 rallied; Bitcoin surged to a record high, while government bonds extended losses. Investment managers now further assess what a “Trump 2.0” administration could mean for global markets. With expectations of aggressive deregulation, substantial tax cuts, and a more confrontational stance on trade—especially toward China—analysts anticipate a mix of opportunities and challenges across sectors.

Economists from Barclays highlighted that this US election implies “particularly high uncertainty for the global economy, given some of the policy proposals by Trump”. They estimate that GDP growth could be cut by 0.3% in the US, 0.6% in emerging Asia and 0.8% in China.

The second Trump presidency could prioritise policies like aggressive deregulation, further corporate tax cuts, and a tough trade stance, especially towards China. Key sectors such as energy, financials, and defence might benefit from relaxed oversight and favourable tax conditions.

A tough trade stance could increase geopolitical tensions and create volatility, impacting industries reliant on global supply chains like technology and consumer goods.

J.P. Morgan Asset Management predicts that Trump will adopt a stricter stance on foreign policy, focusing on China and using executive orders to regulate outbound investments and data. A proposed universal 10% tariff on all US imports, paired with a steep 60% tariff on imports from China, would escalate trade tensions.

Meanwhile, the stock markets reacted very positively to the election news during the night. This is probably also due to the tax policy announced by Trump, Neuberger Berman opines.

“Trump wants to reduce the corporate tax rate to 15%, at least for companies that produce in the USA. Such large tax cuts should not be underestimated,” said Joseph V. Amato, CIO of equities at the American asset manager. “A one percentage point change in the corporate tax rate could cause the profits of S&P 500 companies to rise or fall by just under 1%. At five percentage points, S&P 500 profits would rise by 10 or 20% in 2025 under the same conditions, rather than by 15% as previously assumed.”

Franco-German financial services group Oddo BHF views Trump’s victory as a positive signal for US economic growth, especially when compared to the slower development in Europe and China, a sentiment reflected in initial market reactions on Wednesday.

“Trump’s economic policy favours American equities. By contrast, the shares of many European companies will suffer from higher import tariffs in the USA,” said Jan Viebig, Chief Investment Officer der ODDO BHF SE. “The problems in the German automotive industry in particular will increase as a result of Trump’s election victory. Nevertheless, we see price opportunities for shares of quality European companies with a high proportion of sales in the USA.”

DWS points out that the medium-term impact of the election may be “less significant for equity markets than it feels today”. As their CIO Björn Jesch explained, “during the last Trump presidency, the S&P 500 generated a total return of 70%. Since the start of the Biden presidency, markets are up a roughly similar figure – about 80%. Other factors working in the background appear to be more important drivers for equities than politics in isolation.”

For sustainable investors, the Trump presidency could prove to be bad, opines Scandinavian mutual fund company Skagen Funds, since Trump plans to increase oil and gas drilling and decrease environmental regulations.

“His stated intention is to reverse the Inflation Reduction Act (IRA) passed by Joe Biden in 2022 that pledges hundreds of billions of dollars in funding and tax incentives to spur investment in green technology and renewable energy,” said Skagen, however, adding that a full repeal would be unlikely.

This means, renewables might struggle when seeing a (partial) reversal of the IRA. US energy stocks, however, could see some benefits from a more pro-oil and gas stance of the Trump government.

For emerging markets, Archie Hart, Emerging Markets Equity Portfolio Manager at Ninety One, observed that the initial response to Trump’s victory has been measured, with some weakness seen in China and Mexico due to tariff concerns, contrasted by strength in regions like India and Malaysia that may gain from shifts in supply chains. Over the long term, he believes emerging markets’ performance will hinge on the interplay of economic growth, currencies, interest rates, and geopolitics, anchored largely by enduring economic trends.

“The American President is a very powerful figure, but we suspect the laws of economics may prove even more powerful in the long run. In the medium-term market performance will be driven by policy implementation and execution, much of which is still to be determined,” said Hart.

For European markets, Trump’s stance on the Ukraine conflict could have an impact, as well as tariffs.

“What may change in foreign policy is a forceful attempt to resolve the Ukraine conflict and introduce increased cooperation with Russia,” said Francis Ellison, Client Portfolio Manager, European Equities at Columbia Threadneedle Investments. “That would help Europe as it would be likely to reduce the oil price, where Europe is a major importer. So we would expect European growth to rise and European inflation to fall.”

“Conversely, while Russian tensions subside, those with China may increase – continuing the theme of President Trump from 2016. This is likely to put pressure on any Europeans who trade there; European companies who may also see tariff threats rise with the US,” Ellison added.