Bâtirente’s Investment Strategy Manager, Jean-François Dumais*, shares his comments following the US elections.
With Donald Trump elected to lead the US, what are the expected impacts on the economy?
This election will definitely bring changes, since the new president wants to implement measures that include the following:
- Tax cuts for businesses
- Deregulation of the energy sector
- Increased tariffs on foreign products
- Decrease in immigration
The economic impact of these measures will depend on the new administration’s ability to implement them and how quickly they do so. In the short term, these measures will likely be seen as positive for the American economy. However, such measures could have negative consequences for several years to come that include:
- A slowdown in economic activity due to decreased immigration and increased tariffs on foreign products
- Increased inflation due mainly to tax cuts
We’re already seeing the impact of these measures on financial markets and their expected consequences. What’s that about?
The day after the Republicans’ win, we witnessed high volatility in financial markets and impacts on:
Equities:
- Rise in US equities due primarily to expected tax cuts
- Decline in European and Asian equities caused by the fear of higher export tariffs
Bonds:
Interest rate hikes, given that the expected measures could lead to greater inflation, causing a considerable decrease in bond prices.
Currencies:
Rise in the US dollar, as market players predict that the American economy should perform relatively well compared to other countries.
How does someone manage their portfolio under these conditions?
Financial markets’ short-term reactions reveal that Donald Trump’s election will bring volatility in the coming years. Still, we need to remain vigilant when it comes to this reaction, since it’s difficult to make long-term predictions about which asset classes will benefit the most from this election.
That’s why maintaining diversification across various asset classes and regions is crucial to ensure that investors can navigate these storms.
What’s important to remember is that Bâtirente’s funds are designed to provide a high degree of diversification so you can successfully weather a range of economic scenarios.
Each quarter, Jean-François Dumais shares his economic and market highlights in your newsletter. The next issue of Our funds at a glance will be published at the beginning of 2025.
*Jean-François Dumais has worked as an Investment Strategy Manager at Bâtirente since 2019. Along with a Master of Business Administration (MBA) degree (Finance specialization), he has over 20 years’ experience in financial markets.