Get Premium Data for Cyber Monday: Up to 55% Off InvestingProCLAIM SALE

Key investor takeaways as Trump secures election comeback

Published 06-11-2024, 07:24 pm
© Reuters.
US500
-

Investing.com -- Donald Trump has the U.S. presidential election, and investors are now focusing on the implications for fiscal policy, trade, immigration, and deregulation under his administration.

In notes on Wednesday, analysts from Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) highlighted economic shifts that may impact markets.

The future of fiscal policy remains uncertain, largely dependent on whether Republicans gain control of the House of Representatives. Bank of America notes that a Republican sweep could lead to a "more expansionary" fiscal policy, which may involve extending key tax cuts under the Tax Cuts and Jobs Act (TCJA).

However, a divided government would require bipartisan agreement, potentially limiting deficit growth.

Morgan Stanley emphasizes that control of the House is critical, as it will influence how market expectations evolve, especially for U.S. Treasury yields.

Both banks anticipate an immediate shift towards higher tariffs, with BofA projecting that tariffs on Chinese imports will likely increase “in short order.”

Morgan Stanley agrees, noting that trade actions could extend to Europe and Mexico as well. Unlike Trump’s first term, analysts suggest that tariffs could take priority over fiscal stimulus, potentially challenging economic growth while reinforcing a “strong dollar” policy.

"The former president has stated a preference for a weaker US dollar. But we think the policies Trump has advocated for likely lead USD higher, as it did overnight," said the bank. "This fundamental rationale is due to increased tariff risk, geopolitical uncertainty, and expectations for a more
expansionary fiscal agenda."

On deregulation, BofA sees a likely reduction in regulatory burdens, especially in sectors like energy and financial services, which could serve as a growth catalyst. However, restrictions on immigration could impact labor supply and slow GDP growth, potentially affecting industries reliant on immigrant labor.

The dollar has strengthened following the news as investors price in tariffs and deficit expansion. U.S. Treasury yields also climbed, with BofA projecting a trading range for the 10-year yield between 4.25% and 4.75%

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.