Trump 2.0 - What can we expect?
An emboldened Trump returns – it would be easy to say we’ve seen it all before. Trump 2.0 is like the original Trump on steroids. His “Make America Great Again” (MAGA) movement is bolder, much more organised, surrounded by a fiercely loyal team and, as yet, largely unchecked. Trump’s first term (2016 – 2020) now seems like it was just the warm-up act.
His inaugural address was pulsating with confidence and packed full of promises to the American people. The 47th US president has reasons to feel self-assured. Just four years ago, he was an embattled incumbent, departing Washington with the lowest approval rating of any post-WWII US president and under the shadow of the violent January 6 Capitol insurrection.
Today, Trump’s popularity sits at an all-time high. He returns to the Oval Office as the first Republican to win the popular vote in more than two decades and just the second president in American history to reclaim the White House for a non-consecutive term.
Following his decisive electoral win, global share markets have increased significantly. He’s proposing a similar agenda to his first stint in power – an emphasis on market-friendly and pro-business policies, deregulation, elevated fiscal spending and tax-cuts.
However, his return also means increased economic, trade and geopolitical uncertainty given the more extreme nature of many of his policies and his own erratic approach to policy making – often characterised by grand statements on social media that may or may not go anywhere.
This is likely to contribute to a volatile ride for investors. Trump’s policy agenda is somewhat schizophrenic for investment markets, in that it includes some very pro-market aspects – with tax cuts and deregulation – but some negative aspects – notably around tariffs and immigration.
Fiscally conservative House Republican’s will hopefully keep a lid on his populist inflation boosting tendencies (including the tariffs), however, this may not be clear for a while. His policies on tariffs, will create a lot of uncertainty and disruption which may trigger a correction this calendar year.
Simmering beneath the surface of a robust global economy and with global share markets at record levels, is the mounting threat of unprecedented levels of US debt and potential higher inflation due to some of his policies.
Finally, with US stocks now accounting for approximately 70% of the MSCI World Index; the “magnificent seven” stocks remaining the world’s most crowded trade; the euphoria of US households towards the equity market (a majority believing that shares will automatically go up in the next 12 months), leads us to the conclusion that:
We can expect Trump 2.0 to be a “fairly wild and unpredictable ride.”
Boris Pedisic CFP®
Representative (No 301739)
