American voters have spoken, and Donald Trump will be the American president from 2025 to 2028.
It was nothing short of a spectacular election, two Democratic candidates, multiple assassination attempts and betting markets swinging back and forth.
The election outcome became clear within hours and not a contested election that most were expecting.
Trump won the popular vote and most swing states.
The election also included congressional races for the Senate and the House of Representatives. The Senate has been flipped from the Democrats to the Republican. At the time of this writing, the House of Representatives is uncertain, although it looks likely that it has been held by the Republicans.
We are writing this on the assumption that it is a Republican sweep of the White House and House of Representatives and Senate. Expectations for a Republican sweep rose in betting markets throughout most of October but started to reverse at the end of the month as Harris regained momentum. As of Monday, Polymarket (world’s largest prediction market) still showed a Republican sweep as the most likely outcome.
The implication of a Republican sweep unlocks more fiscal support and is easier to spend money or cut taxes etc.
Historically, Republican sweeps have been positive for the stock market. When Republicans control all branches of government, the S&P 500 has generated an average return of 13% since 1992.
As for his policies and economics, we are not assuming Trump does everything that he’s talked about on the campaign trail. For example, we’re not anticipating a large-scale deportation in the US or a full set of Trump tariffs to be implemented or a blanket 10% tariff on the world.
There will probably be efforts to make changes to the Federal Reserve, however, Congress does not want many of those things.
Trump is sensitive to the stock market and economy and both those and his business supporters don’t want extreme proposals to be implemented.
We can look to when he was president previously from 2017 to 2020 and Congress was a Republican sweep for the first two years of that term which is a very similar setup over that period. The economy did grow, and the stock market rose too.
As for Trump’s policies, the prospect of higher tariffs is an economic negative. Immigration curtailing is also an economic negative. Trump will most likely have less government spending than a Harris presidency.
We do see positives that offset those negatives. Deregulation and friendlier policy toward the oil sector and tax cuts are also potentially economically supportive.
Neither candidate had a massively stimulative platform, and we don’t think deficits leap higher here. We’re not looking for a big jump in economic growth. We think Trump’s platform is slightly supportive of the economy.
We are of the view that Trump is slightly inflationary in the context that tariffs are inflationary. Tariffs add to the cost of things and the economy might move a bit more quickly than under the alternative.
The net of it is we are budgeting for slightly higher inflation and could be resolved via central banks don’t cut rates quite as much. You might end up with the same amount of inflation but slightly higher rates, so there’s a trade off between those two variables.
Let’s not forget markets do go up over time and have done so historically under both Democratic and Republican administrations. As long-term investors, we invest over multiple election cycles and presidents are temporary.
Historically, elections aren’t the primary driver of markets, there are other things that matter to investors beyond election outcomes.
We are going to learn the implications for the economy and markets in the coming days and months.
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