Investment update following the US Election

On Wednesday 6th November 2024 Donald J Trump become the 47th President elect of the United States of America.

US stock markets took the news very well, the S&P 500 closed up 2.53%. NASDAQ up 3.57% and the Russel 2000 up 5.84%. Alongside positive market growth, a Trump presidency is expected to be inflationary, thus meaning the Federal Reserves decision to cut rates may be delayed as markets adjust.

Trump ran on a populist platform focused on illegal immigration, crime, tariffs and tax cuts, his proposals include:

– Extending provisions of the tax cuts and jobs act, informally referred to as the ‘Trump tax cuts’, some of which are currently set to expire in 2025.
– More targeted taxation policies, including dropping federal income tax form tipped wages and social security income for seniors.
– Taxation of imported goods and services. Trump has proposed at least a 10% tariff on all imports and a 60% on Chinese goods. He has also gone as far to suggest a 200% tariff on cars built in Mexico.
– Scaling back regulations to try and unlock further economic growth.
– To include the president in the Federal Reserve’s monetary policy decisions
– Implementing a tax credit for family caregivers, potentially also increasing the annual Child Tax credit from $2,000 to $5,000 per child

We continue to pay close attention to any policy driven changes and the impact they have on financial markets. Currently the primary focus is still inflation and rising government debt. The administrations fiscal policy could see national debt rise by up to $15 trillion, which brings concerns over the sustainability of the policies. Another key area is in the deportation of undocumented immigrant workers, who currently make up almost 5% of the US labour force, mass deportation would inevitably result in higher labour costs and thus further inflationary pressure. Also, having a president in place that is enabled to shape monetary policy could result in dramatic impacts on borrowing costs and the overall economy.

We take the view that Donald trumps legislative agenda is likely to change a little before coming into effect. Our message to investors remains the same as in other times of market volatility, to focus on market fundamentals and long-term goals. Our investment management partners are not currently taking any added action in our portfolios based on the election results.

The new administration presents opportunities and challenges within financial markets. At Francis Clark Financial Planning we continue to position client portfolios based on market fundamentals, while keeping a key focus on diversification.