Markets assess Donald Trump was the victor in the first US presidential debate against Joe Biden on Thursday and investors are “already busy” re-evaluating their portfolios to align with the anticipated economic policies that a Trump administration might pursue.
Following the head-to-head TV debate, online prediction market PredictIt showed Biden’s odds down to 39% from 45% a day earlier, while Trump’s were up to 61% from 55%.
“The debate saw the dollar jump in Asia trading indicating increased confidence among investors in the stability and growth potential of the US economy under a Trump leadership, with the greenback on track for a sixth straight weekly gain,” said Nigel Green, CEO of deVere Group, a leading independent financial advisory and fintech.
“Concurrently, the yen weakened slightly, trading around 161 per dollar, reflecting a shift in investor sentiment towards the dollar.
“Bitcoin, the world’s largest cryptocurrency by market capitalization, also spiked as Trump is widely regarded as more pro-crypto than Biden.
“US stock futures also experienced a rise in Asian trading on Friday, again demonstrating investor confidence in a potential Trump administration.
“This uptick suggests Wall Street expectations of favorable economic policies that could stimulate market growth.”
The deVere CEO cites four key factors driving this investor sentiment.
“First, investors anticipate that a Trump presidency would bring about lower corporate taxes. This would enhance corporate profitability, leading to increased stock valuations and greater investor returns.
“Second, Trump’s previous term was marked by significant deregulation efforts, which are expected to continue. This would reduce compliance costs for businesses, allowing for greater innovation and expansion.
“Third, while tougher trade relations with China might introduce short-term volatility, it’s hoped by many traders that it will lead to stronger domestic industries and a more resilient US economy.
“And fourth, anticipated fiscal policies could drive bond yields higher, providing attractive opportunities for fixed-income investors.”
Investment Strategy Adjustments
Given the current market assessment, the deVere Group CEO says “investors are already busy” considering strategies to position their portfolios more favourably for a potential Trump presidency.
“They are likely to be increasing exposure to US equities with a focus on sectors that are likely to benefit from deregulation and lower taxes, such as tech, energy, and financial services.”
He added that, “with the dollar showing strength, they can be expected to be diversifying currency exposure to include stronger performing currencies like the dollar and Bitcoin can provide a hedge against potential volatility in other markets.
“Elsewhere, they are likely to be preparing for higher bond yields by adjusting bond portfolio duration and considering inflation-protected securities.”
The first presidential debate has undeniably influenced market dynamics. As we approach the 2024 US election, deVere Group remains committed to providing strategic guidance to help investors navigate the evolving economic landscape.
“As the presidential debate clearly illustrated, the prospect of a Trump presidency is generating significant enthusiasm in the financial markets, with Wall Street perceiving that the policies likely to be enacted under a Trump administration could be broadly more beneficial,” said Green.
