Trump’s victory: what impact on your investments?

Stocks, bond yields, cryptocurrencies, gold… How the election of Donald Trump will boost (or not) your investments.

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“Come-back» American style. Donald Trump won the presidential election this Wednesday, November 6. If the victory of the Republican candidate was finally clear, and the suspense was only short-lived, the impact that the return to business of the former businessman will have on your investments is for the moment more difficult to predict. determine.

With a majority in the House of Representatives and the Senate, the 47th President of the United States should have a free hand to carry out his economic program: increase in customs duties, reduction in taxes on businesses, deregulation of the cryptocurrency market … A prioria pro-business policy, therefore, which, on paper, should delight the world of finance, but which also carries the risk of a return of inflation.

After the euphoria of “Trump-trades”, a stock market landscape that remains difficult to draw

The American stock markets were right. Anticipating a victory for the former President, and tax and regulatory relief, American indices have performed well in recent weeks (+1.5% on the S&P 500 over the past month, +7.5% on the Nasdaq) . In the short term, certain sectors could also benefit from this victory, and see their prices rise: fossil fuels, defense, the American automobile sector, small and mid-caps… But nothing indicates that after the euphoria, these stocks continue to rise. In the coming months, other factors will also be determining: geopolitics, the global economic cycle, the monetary policy of the Federal Reserve (Fed)…

On the bond side, it is rather concern that prevails. Debt securities issued by the United States for a period of ten years (the famous “Treasury bonds”) reach a rate of 4.47%. “It’s high, if we remember that it was only 3.60% in mid-September, and especially that the Fed has started a cycle of rate cuts, which in principle should bring down the interest rate. American bonds”points out Alexandre Baradez, market analyst for the company IG. For investors, this means that it remains possible to obtain a very attractive return at lower risk by purchasing American debt, via bonds.

What about gold and cryptos?

Concerning the yellow metal, the end of the uncertainty surrounding the American election should not sweep away the others. The conflict in Ukraine, tensions in the Middle East and the return of a trade war between China and the United States have every chance of continuing to boost the price of gold, which could reach the historic milestone of 3 000 dollars per ounce in the coming months. For its part, Bitcoin reached a historic high this morning, exceeding $75,000. But will this expected reaction following the victory of the man who presents himself as the “President of Bitcoin” necessarily continue in the weeks to come?

Not sure, for Alexandre Baradez, first of all, because we will have to wait for the deregulation measures wanted by Trump to materialize. What’s more, “when the dollar is strong (+1.72% this morning against the euro) and American bonds are at high rate levels, this is generally a disadvantage for cryptocurrencies”recalls the analyst. Indeed, in this scenario, investors tend to favor the return on bonds – less risky – and a tangible currency, such as the dollar.

In Europe, an opportunity for the equity markets?

Finally, what impact can we anticipate for European assets? This morning, the Paris Stock Exchange reacted well to Trump’s victory (+2% on the CAC 40). “European stock markets are undoubtedly hoping that Trump’s victory and the return of a harsher trade ‘war’ will be an opportunity for Europe to rearm itself economically and stimulate the growth of its businesses”analyzes Alexandre Baradez. However, a sign of future uncertainties in the global economy, the rate on 10-year French bonds rose slightly at midday, to 3.16%. But it must be said that on this side of the Atlantic, the victory against inflation seems more assured, and should result in further rate cuts from the ECB, with a drop in bond yields, and this, despite the results of the night, according to Alexandre Baradez: “even if inflation picks up again in the United States, Trump’s isolationist policy could in fact protect Europe from contagion.”