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By Toby Patrick
(Special to Financial Independence Hub)
Donald Trump is poised once again to become the president of the United States, becoming only the second president to be reelected after leaving the White House. The last time this happened Grover Cleveland was celebrating his second stint as president from 1893 to 1897.
Two world wars, a Great Depression, and 23 presidents later, it’s safe to say the world looks very different.
Cleveland’s second stint in office began with a decline in the New York stock market in what was known as the ‘Panic of 1893’. Fast forward over 130 years and the U.S. election is still closely linked to the performance of the U.S. stock market. Only this time we’re talking tariffs, tech companies, and cryptocurrencies.
This article will explore what a Trump victory could mean for markets around the world.
What does Trump’s Victory mean for the U.S. Stock Market?
The general consensus is that Donald Trump’s victory will be good for businesses and the U.S. stock market. If the immediate reaction on the 6th of November is anything to go by, this would be true. Many U.S. shares hit record highs and the S&P surged by around 2.5% as investors bet on Trump’s pro-business policies.
At the heart of this initial boom were companies that stand to benefit from Trump’s hard-hitting tariffs that are to be imposed on international imports. Take the Elon Musk-owned Tesla for example. The world’s richest man acted as the President’s mouthpiece in the run-up to the election, and it’s easy to see why.
Not only do Trump’s policies favor high-net-worth individuals, but his threatened 60% tax on Chinese imports would essentially burden the competition to American-owned businesses. Tesla’s share price subsequently rose to a yearly high as news of Trump’s win filtered in.
On the flip side, Trump’s tariffs might not be good news for all American stocks. Large tech corporations rely heavily on Chinese imports. Increased costs could impact the share price of the “Magnificent Seven” stocks while also seeing the consumer pick up the cost through higher prices for electronic goods.
What does the Trump Victory mean for the Global Stock Market?
Generally speaking, if a Trump victory is good for the U..S economy, it’s good for major global corporations that export to the U.S. Initial optimism across the rest of the world mirrored that in the U.S. However, unlike the U.S., the euphoria was dying out by Wednesday as investors realized the implications of the tariffs mentioned above and what they could mean for international trade.
While China has been threatened with the strictest of Trump’s tariffs, a 10% tax on all U.S. imports would impact Europe too. Take the U.K. for example. Rolls-Royce is one of the world’s biggest manufacturers of aircraft engines and heavily exports to the U.S. While companies like this may benefit from an upswing in the American economy, this could be wiped out by increasing taxes.
This view would line up with performance too. Rolls-Royce Holdings initially rose as the news of a Trump victory filtered in before sharply declining to pre-election prices as investors possibly started to consider the future of international trade.
What does the Trump Victory mean for Cryptocurrencies?
Today, it’s becoming increasingly common for investors to look beyond traditional stock markets when it comes to investing. One of the most common alternatives, and a big talking point throughout the election campaign, is Bitcoin and other cryptocurrencies. Trump was seen as the pro-crypto option, publicly stating his positive view on crypto and even previously being involved in the promotion of NFTs.
However, it’s worth pointing out that this hasn’t always been the case. A 2019 tweet from Trump may suggest his changing stance on Bitcoin is driven by a desire to win votes from the ever-increasing crypto audience.
It remains to be seen if Trump will actually follow through on his plans to support crypto innovation, one of which is his commitment to remove Gary Gensler from his position as head of the SEC. Gensler could be considered Public Enemy Number One to crypto advocates, as he has long been seen as an opposer to less regulated crypto markets. Many believe he will now voluntarily resign from his position given the outcome of the election.
The outcome and sentiment have had an immediate knock-on effect on the price of Bitcoin, which surged past US$75,000 for the first time in its short history. If Trump is to follow through on his pro-crypto proposals, we can expect to see more crypto ETFs in addition to January’s groundbreaking Bitcoin ETF, paving the way for a potential bull run in the crypto world.
Final Thoughts
While the short-term impact of Trump’s victory seems positive for U.S. markets, it would be normal to see excitement slowly wane as the news slowly becomes old news. Despite this, Trump’s win is seen as a win for businesses, particularly large enterprises based in the U.S. Outside of the U.S., the future is a little less clear with Trump threatening to impose heavy taxes on imports. For the everyday man or woman on the street, it’s even more unclear. Will Trump’s return to the White House leave lower earners seeking debt advice, or will Trump genuinely make America great again?
Toby Patrick is a freelance business writer based in Manchester, UK. His writing covers a variety of topics ranging from small business advice to current affairs and financial news.
