With a significant lead in national and early state polls, the prospect of defeating incumbent Joe Biden is capturing the attention of investors around the world, despite former U.S. President Donald Trump's absence from the third Republican debate.
The November 8 Republican debate featured five candidates, including former New Jersey Governor Chris Christie, Florida Governor Ron DeSantis, former U.N. Ambassador Nikki Haley, entrepreneur Vivek Ramaswamy and South Carolina Senator Tim Scott. Frontrunner Donald Trump did not attend, instead hosting an event not far away in Hialeah, Florida.
Nigel Green, CEO of financial planning advisory firm deVere Group, noted that global financial markets, always focused on the intersection of politics and economics, are poised for a dynamic response if Trump returns to the White House. Whether you support him or not, he notes that there are both positive and negative aspects of a Trump run for the markets.
One of the main factors influencing market sentiment is Trump's legacy from his previous term. His administration, characterized by pro-business policies such as tax cuts and deregulation, has created a positive market environment.
Investors have responded positively to plans to boost economic growth and argue that Trump's return to the presidency could reignite optimism, especially in areas sensitive to regulatory change. However, the road ahead is not without challenges. Trump's past penchant for trade wars, particularly with China, has injected volatility and uncertainty into global markets.
A second Trump presidency could reignite concerns about protectionist measures, trade tensions and geopolitical instability. With the specter of a new tariff war looming large, investors may find themselves rebalancing their risk exposures. The unpredictability associated with Trump's governing style is another factor that could influence market dynamics. His "America First" policy, characterized by unilateral decision-making, has challenged established norms of multilateral cooperation.
The potential resurgence of this approach could raise questions about the future of international relations and create geopolitical tensions, prompting market participants to reassess their risk strategies. Domestically, the Trump administration's business-friendly policies are expected to be well-received in certain sectors, but concerns about social and political stability could cool markets.
Experts argue that there is no doubt that Trump's polarizing rhetoric and divisive governing style could exacerbate domestic tensions, potentially impacting market sentiment. The Federal Reserve (Fed) is also expected to recalibrate monetary policy in response to the changing political landscape. If Trump's victory is expected to lead to a significant increase in economic activity and inflationary pressures, the Fed may consider gradually raising interest rates again to prevent overheating and excessive inflation.
