Donald Trump has picked Kevin Warsh as the new chairman of the Federal Reserve, the US central bank, after months of very public arguments. The markets liked the choice. Equities rose on the news and gold tumbled as investors decided they no longer needed to hedge against the collapse of the dollar. Warsh is an experienced banker and policy-maker, but he is also close to the Trump circle, and in the past has advocated bold reforms of the way monetary policy is set. Given that Trump could easily have appointed Elon Musk, or one of his children, or even Melania, Warsh is seen as a relatively safe pair of hands.

Still, the challenges Warsh faces are daunting. First, he will have to re-establish the independence of the central bank. Trump has very clearly been trying to bring the Fed under political control, pushing it to cut interest rates even though it is far from certain that inflation is not going to start rising again. The incumbent, Jerome Powell, is facing legal action for overspending on the Fed’s new headquarters. The markets are not going to trust a Trump stooge and especially one who looks willing to start printing money to finance the president’s lavish spending and tax cuts. At some point, Kevin Warsh will have to make it clear that he is in charge, not the president. If he doesn’t, and if he seems to be conceding to Trump’s demand to juice the economy, especially ahead of the mid-term elections due later this year, the sell-off of the dollar, and Treasury bills, will start up all over again, and perhaps more savagely.

Next, Warsh needs to persuade both the White House and Congress that the deficit genuinely matters. The US economy is in robust health, but the budget deficit is still running at more than 5% of GDP and there are no plans to bring it under control. The US state has become addicted to borrowing to finance its spending. The last president to actually balance the books was Bill Clinton at the start of the century. The US has managed to get away with it so far, racking up bigger and bigger debts with every year that passes. But it has benefited from its reserve currency status, and it has been able to mop up huge amounts of Chinese savings. None of that will necessarily last forever. Warsh needs to find a way of getting the Senate, Congress and White House to control spending and, if necessary, raise taxes. The US can’t run deficits forever without risking ruinous inflation.

Thirdly, the new Fed chair needs to reinvent the dollar for a post-globalisation world. Trump has made it clear he does not want the US to finance the global trading system, that he is determined to bring free trade under control, and he wants to put America first. That is why he has ripped up the free-trade consensus and imposed the steepest tariffs since the 1930s. Whether the dollar can remain the global reserve currency in those circumstances is far from clear. Indeed, there is already evidence that central banks around the world are diversifying into gold and even bitcoin. The European Central Bank is too weak to influence anything, but China is carving out a global role for the yuan, and that is only going to grow in significance. What is the role of the Fed in all of that? Warsh will need answers, or else be left floundering as the world changes around him.

Kevin Warsh will need to calm the AI bubble

Finally, Kevin Warsh needs to calm an AI and tech bubble that has run out of control. AI is clearly a major new technology, and will create huge business opportunities, but it is also clear that investors have driven valuations far too high, just as they did at the height of the first internet boom a quarter of a century ago. Likewise, a handful of leading tech stocks have dominated the global markets. Sure, it will be great for the US economy that so much money is invested in the technology, with more than $100 billion poured into data centres and start-ups over the last year. It will pay off eventually in terms of new products and higher productivity, and it is a lot more impressive than anything that is happening in Europe. Even so, a crash will derail that, and once it starts may easily run out of control. The trick for Warsh will be to curb what one of his predecessors, Alan Greenspan, described as “irrational exuberance” without the entire market collapsing. It will not be easy. But he will have to try all the same. If the bubble carries on for another year, it will be too late.

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Following a trip in May to a US investment conference to meet with company bosses, James Harries, the manager of STS Global Trust, reported that, “as ever one cannot fail to be impressed by the sheer scale, dynamism and competitive zeal of US corporates and the wider economy. There was widespread angst relating to tariffs, the unpredictability of policymaking and the stress on the consumer, but this had yet to show up in end demand.” Perhaps most remarkably, “not one company mentioned the word ‘Trump’”. At the time, it seemed that business leaders, fund managers and pundits in the UK were talking about little else. The consensus that had prevailed at least since his inauguration, if not well before, that Trump was mad, bad and dangerous, is being slowly transformed into a more measured analysis.

Jonathan Sumption, a former senior judge on the UK’s Supreme Court, remains firmly in the critics’ camp. He has warned that Trump’s bullying tactics, intolerance of even mild dissent, readiness to use presidential prerogative to drive through his agenda and vocal threats to those who stand in his way bear all the marks of an aspiring dictator. The checks and balances of the US constitution, with its division of power between the executive, Congress and the Supreme Court, and between federal, state and local government, has been steadily undermined, says Sumption. The muted opposition to all his proposals must mean that opponents and sceptics have been cowered into submission – that Trump has captured the Republican Party and has made himself unaccountable. The approval of presidential appointments, including cabinet positions, is just a rubber-stamping exercise.

Donald Trump is not Adolf Hitler

This view is echoed by Filipe Campante and Ray Fisman, writing for Bloomberg. “The second Trump administration has undertaken a sweeping expansion of presidential power,” they write. “The White House is attempting to usurp some of Congress’s spending powers and to reclassify civil servants so as to make them easier for the president to fire. He deployed the National Guard on California over the governor’s objections under the auspices of responding to a rebellion.” Campante and Fisman argue that the power of the courts is being challenged, students detained and universities bullied into submission. “The system that is currently under threat has endured periods of remarkable stress but democracy survived and thrived by responding to these challenges. This track record led to an understandable and almost unshakable belief that American democracy was unassailable.”

Now, however, the two-party system has turned from being a barrier to extremism (as voters converge to the centre) into a trap, say Campante and Fisman. “If extremist or anti-democratic forces somehow manage to capture one of the two major parties, the system would switch from being a barrier to extremism into an accelerant. Helped by the rise in partisanship, which keeps voters loyal, Trump and his loyal proxies can credibly threaten every Republican elected official with the destruction of their political career.”

Niall Ferguson, the author and historian, takes a very different view. “People on this side of the Atlantic don’t remotely understand him,” he says. “He is not Mussolini, much less Hitler. It is enormously stupid to compare Berlin in the 1930s, when everyone was in uniform, militarism was rife and lawlessness everywhere, with America now. Trump is recognisably in the American tradition of populism, with tariff policy deeply rooted in the late-19th-century politics of president William McKinley.”

As for the idea that the US is teetering on the brink of authoritarianism, forget it: Trump’s use of executive orders is comparable with that of F.D. Roosevelt in 1933. Trump owes a large debt to Richard Nixon, who first took him seriously as a political figure. Nixon shocked the world in 1972 by meeting Mao Tse-tung, severing the dollar’s link to gold a month later, and by introducing a general 10% tariff.

Ferguson also compares Trump to Reagan in his restoration of military deterrence and the use of surgical strikes. “It reminds people of the superiority of the US military” and that “will have shocked Putin”. The bombing of Iran showed that Russian air defences are useless. German rearmament – precipitated by vice-president J.D. Vance telling Europe that if it doesn’t do something about its defence, Nato was over – is also a disaster for Putin. “Russian attacks on civilians are a sign of desperation as it can’t hit military targets. Putin has overplayed his hand and a war of attrition is unsustainable.”

These developments also make confronting the US a worse idea for China than it was just a few weeks ago, says Ferguson. A Taiwan crisis is still a strong probability, but Xi Jinping “is not a well man and doesn’t have long”. Trump’s successor may not be as amenable to a deal as Trump is, so “the stand-off will reach a culmination in the next three years”. Ferguson believes that China is more likely to blockade Taiwan than invade. After all, “when did the PLA last fight”? “Ukraine would be the last place in the world where I would want to get into a pub fight,” he says. “Taiwan would be my first choice.”

Trump’s tariff masterstroke

As for Trump’s widely derided tariffs, Torsten Slok, chief economist at Apollo Global Management, wonders if Trump hasn’t outsmarted the world with his tariff plan by keeping tariffs below his threatened rates to ease uncertainty while still producing $400 billion of annual revenue for US taxpayers. “This would seem like a victory to the world; trade partners will be happy with tariffs of only 10%.”

Dr Pippa Malmgren, a former US presidential adviser, gives Trump a mark of nine out of 10 for how well he’s doing. “His electoral base loves the changing of the power structure around tariffs, the fact that its succeeding in compelling other governments to negotiate not just on trade but on a variety of other issues.” It might seem as though his attempt to control the budget deficit and hence government indebtedness is failing, with Elon Musk disillusioned about the administration’s failure to slash public spending. Malmgren, however, says that “getting spending under control, will take many decades but the commencement of the process has gone incredibly well. This means addressing the issues of why money is being spent, what it is being spent on and whether it should be. His base is also very happy with his decisiveness on illegal immigration.” This has increased 50% year on year in the UK; attempted crossings of the US-Mexico border have dropped by more than 90%.

Trump’s critics are expecting (or is it hoping for?) a US debt crisis, particularly after the extension of the temporary tax cuts enacted in 2017. In Argentina, Javier Milei’s drastic cutting of public spending has turned an unsustainable deficit into a primary surplus (before finance costs) and is now being rewarded with an economic boom. That was never possible in the US. But it is far too soon to say that Trump has given up on cutting government expenditure; a 10-year US Treasury yield below 4.4% does not suggest that the bond vigilantes are particularly worried. As Ludovic Subran, chief economist and investment officer of Allianz, says, “it’s quite impressive to see how much the market is pricing in the pragmatism of President Trump. A lot of the uncertainty that was really peaking in April and May is now fading away.” You may not like Trump personally, but he is proving effective and markets are responding.

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Summary

This is no longer the latest information. See our new tariff blog for the most up-to-date news and analysis.

• In February, US president Donald Trump imposed 10% tariffs on all Chinese imports.
• He also threatened 25% tariffs on Canada and Mexico, before agreeing a temporary reprieve until the end of the month.
• The president later announced 25% tariffs on steel and aluminium imports on all countries, effective 12 March.
• Read MoneyWeek's live analysis, as it happened.
• Further tariff announcements have since been made, coming into effect at the start of March. We are covering these on our new blog.

This is not a drill

On 1 February, US president Donald Trump announced 25% tariffs on Canada and Mexico and a 10% tariff on China, due to kick in from 4 February. The trade wars have begun.

Trump made extensive tariff threats while on the campaign trail in the lead-up to the US election but, until recently, experts had been warming up to the idea that these were little more than a bargaining chip. The latest moves suggest otherwise.

Here’s everything you need to know – from what’s been announced to how markets have responded.

Markets tumble as trade war heats up

Stock markets tumbled in Asia on Monday in response to the latest news from Washington. In Taiwan, the Taiex index shed 3.53%. In Japan, the Nikkei 225 closed 2.66% lower. Meanwhile, in South Korea, the Kospi fell 2.52%.

European markets have also tumbled so far this morning, as investors process the fact that the EU could be next on Trump’s hit list. The Stoxx Europe 600 is down more than 1% at the time of writing.

Meanwhile in the UK, the FTSE 100 is down more than 1% so far. Trump has indicated that a deal could be “worked out” with the UK to exclude it from tariffs, but even if this is the case, a global trade war would spell bad news for domestic markets and the economy.

European tariffs: “the writing is on the wall”

Although no tariffs have been directed at Europe so far, the “writing is on the wall”, according to Michael Field, chief market strategist at Morningstar. “That Donald Trump has no qualms about imposing them on his nearest neighbours, means that Europe too should be bracing for impact,” he added.

Trump recently told the BBC that the European Union has “taken advantage” of the US and is “way out of line” for not importing more US goods. In 2023 (the most recent year we have annual figures for), the US-EU trade deficit was $208.2 billion.

“They don’t take our cars, they don’t take our farm products, they take almost nothing. And we take everything from them,” Trump said.

Canada and Mexico: is a recession on the cards?

“Since exports to the US account for around 20% of their GDP, today’s tariffs could plunge both the Canadian and Mexican economies into recession later this year,” said consultancy Capital Economics.

The effect of Trump's tariffs will be felt in the US too, though, with consumers now facing the prospect of higher prices. Capital Economics expects US inflation to rise further and faster than previously anticipated, exceeding 3% later this year.

Carve-out for Canadian energy

Trump’s tariffs include a special carve-out for Canadian energy imports, which will be hit with a lower 10% tariff (as opposed to 25%).

According to the BBC, 61% of oil imported into the US between January and November last year came from Canada.

Canadian prime minister Justin Trudeau has previously said that Canadian energy “powers American manufacturing, businesses and homes.”

Speaking in recent weeks before Trump's tariffs were imposed, Trudeau added: “The alternative for [the US] would be more resources from Russia, China or Venezuela. Canada is a safe, secure and reliable partner in an uncertain world.”

Over the weekend, Trudeau announced 25% retaliatory tariffs against the US in response to the latest developments.

What do tariffs mean for inflation?

Just as prices were coming under control, Trump’s tariffs could fan the embers of inflation on a global scale.

Firstly, US consumers will need to pay more for imports from impacted countries.

US businesses will feel the effects too, if they have imported goods or materials anywhere in their supply chain.

If costs increase, businesses could be forced to raise their prices in an attempt to protect their margins – another hit for consumers.

Furthermore, the countries that Trump has targeted are already starting to respond with retaliatory tariffs of their own, and so the problem spreads.

The effects won’t be confined to the US, Canada, Mexico and China either. Global economies operate in a tangled web of interdependence. If goods in the US suddenly become more expensive to produce because of tariffs, any other country that imports those goods will have to pay a premium too.

Markets were not prepared for Trump's aggression

Trump has surprised markets over the weekend with both his speed and aggression.

George Saravelos, global head of FX research at Deutsche Bank, says: “By our estimates, the market was roughly pricing the equivalent of a 5% universal tariff being enacted in coming months, equivalent to a 30bps ‘hump’ in the US inflation curve.

“The announcements this weekend are roughly three times larger with reasonable passthrough assumptions, i.e., we would expect a 1% US headline inflation impact if tariffs are sustained.

“These tariffs are also roughly five times as large as the cumulative sum of trade actions taken under the first Trump administration measured in terms of average tariff increases.”

Saravelos thinks the market needs to “structurally and significantly reprice the trade war risk premium”.

Retaliatory tariffs: Canada bites back

“Canada will not stand by as the United States imposes unjustified and unreasonable tariffs on Canadian goods,” the Canadian government said. “In response, we are moving forward with 25% tariffs on $155 billion worth of imported US products.”

Some items (covering $30 billion of US imports) will be impacted from 4 February, including certain foods, beverages, cosmetics and more.

Other items (covering the remaining $125 billion) will be hit at a later date, including things like passenger vehicles, steel and aluminium.

China to challenge tariffs at World Trade Organisation

China’s Ministry of Commerce has said it will take “corresponding countermeasures” against the US after Trump announced a 10% tariff on Chinese imports. It has not yet given any specifics.

China has also threatened to take a complaint to the World Trade Organisation (WTO), although experts say there is little the WTO will be able to do.

First and foremost, the US has previously ignored WTO rulings under the Biden administration. Furthermore, the body within the WTO that is responsible for resolving disputes is currently short on judges, as the US has been blocking new appointments for the past two years. This means the judges can no longer achieve a quorum.

US equity markets fall

The S&P 500, the Dow Jones Industrial Average and the Nasdaq are all in the red this morning.

At the time of writing, around 30 minutes after market open:

• S&P 500: -1.77%
• Dow Jones: -1.38%
• Nasdaq: -2.24%

“Trump’s launch of tariffs in 2018 did raise revenues for America but US corporate profits took a hit that year and America’s S&P 500 index fell by a fifth, so markets have understandably taken fright this time around,” said Russ Mould, investment director at AJ Bell.

How much revenue will tariffs raise for the US government?

On social media, Trump has previously said that revenue from tariffs could be used to pay off US debt and “make America wealthy again”. However, it is US consumers who will end up footing at least part of the bill in the form of more expensive goods.

“Revenues from the tariffs could reach almost $250bn per year, or 0.8% of GDP. That could be a significant hit to the US economy if those revenues are used to reduce the federal budget deficit rather than recycling them into the economy by cutting taxes or boosting federal spending,” said Paul Ashworth, chief North American economist at Capital Economics.

He adds that US exporters will also lose out thanks to a stronger dollar. They could also be hit by retaliatory measures from other countries.

Trump pauses tariffs on Mexico for one month

US tariffs on Mexico have been paused for one month following a conversation between Trump and Mexican president Claudia Sheinbaum.

Sheinbaum wrote on social media site X: “We had a good conversation with president Trump… we reached a series of agreements”.

Mexico has agreed to reinforce its northern border with 10,000 National Guards to reduce drug trafficking. In return, Sheinbaum has sought commitment from the United States that it will prevent the trafficking of high-powered weapons to Mexico.

Car makers take a hit

Car makers have been some of the worst-impacted stocks in today's tariff-related sell-off.

Toyota and Nissan both fell by more than 5% during trading hours on Monday, while Honda fell by more than 7%.

European markets are still open but BMW is down more than 3% at the time of writing, and Volkswagen nearer 5%.

The US still has several hours to go until markets close, but General Motors is almost 2% lower at the time of writing, Ford is down more than 1%, and Stellantis is down more than 4%.

Case study: how a Chevrolet Silverado is made

Chevrolet, owned by General Motors, is one of the most popular US car brands. Its bestselling model last year was the Chevrolet Silverado.

Looking at how this car is made can help bring the potential impact of tariffs to life.

As Caleb Miller, associate news editor at Car and Driver points out, a portion of the company’s trucks come from General Motors’ factory in Silao in Mexico, while others are built in Oshawa in Ontario.

This is just one example at one company – scale it up and you start to get a picture of just how disruptive tariffs could be for businesses.

Ford and Stellantis – two other American car giants – also have factories across the border in Mexico and Canada.

Can the US bull market continue?

A lot has happened over the past seven days. This time last week, US equity markets were rattled by the DeepSeek news and today it is tariffs that are causing disruption.

Indeed, even before the events of the past week, the word “bubble” was being used more and more extensively as investors questioned whether US equity valuations had gotten out of hand. The US tech sector in particular has flown in recent years. Whether it is on the brink of an Icarus moment is up for debate.

Despite this, Tom Stevenson, investment director at Fidelity International, warns against panic, encouraging investors to “view the threat to markets in context”.

He adds: “January closed out on Friday on a high, global shares rose by 3.4% during the month, with the S&P 500 up 2.8% and the equal-weighted version of the same index up 3.5%. Much of this strength can be attributed to another solid earnings season, with 80% of the companies reporting so far beating expectations.”

That concludes our live coverage for today. Thank you for joining us. We will be back tomorrow with further updates and analysis.

The headlines overnight

Good morning and welcome back to our live blog on Trump’s tariffs. These are the headlines since we signed off yesterday evening:

• Tariffs on Canada have been postponed after last-minute talks between Trump and Trudeau.
• In exchange, Trudeau has agreed to reinforce the US-Canadian border in a deal that has echoes of the agreement between Trump and Mexican president Claudia Sheinbaum.
• 10% tariffs against China have not been postponed and came into effect at 00:01 EST this morning.
• Beijing has announced retaliatory tariffs on US products, including a 10% tariff on crude oil, farm equipment and some vehicles, and a 15% tariff on coal and liquified natural gas (LNG).

European markets still jittery

European markets fell this morning as investors remain nervous about tariffs.

In the UK, the FTSE 100 was down 0.7%.

“With markets on a tariff tightrope, volatility looks set to stick around,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Investors are still weighing up when and how Trump might set his sights on Europe – and what exactly he is trying to achieve. As yesterday’s developments show, the situation can change quickly.

“For those willing to ride the waves, there may be chances to cash in on overreactions, especially if Trump’s tariff bark proves worse than his bite,” Britzman added.

What do tariffs mean for the dollar?

The US dollar strengthened after Trump’s tariffs were announced over the weekend. It has since fallen back slightly after measures against Mexico and Canada were put on pause.

Tariffs usually strengthen a country’s home currency because they make it more expensive to buy and import foreign goods (which are priced in foreign currencies). This means fewer foreign goods are bought which, in turn, means less foreign currency is needed.

Ultimately, the dollar could strengthen even further if Trump’s tariffs result in higher inflation. Why? Because a resurgence in inflation could force the Federal Reserve to keep interest rates higher for longer. Generally speaking, a currency strengthens when interest rates go up and weakens when they go down.

Tariff threats: a headache for Diageo

Drinks company Diageo – the owner of brands like Guinness, Smirnoff and Johnnie Walker – announced its interim results today (4 February). The company’s shares are in the red after it ditched its medium-term growth guidance (5-7% organic net sales growth), blaming the current geopolitical environment.

The US is Diageo’s largest market, and chief financial officer Nik Jhangiani told analysts on the earnings call that around 45% of the company's net sales in the region come from products made in either Canada or Mexico. This includes the company’s tequila portfolio, as well as Canadian whiskey. With this in mind, Trump’s tariffs are a real concern.

Adam Vettese, market analyst at investment platform eToro, said: “Despite revenue coming in slightly ahead of forecast, the spectre of tariffs looming is a far bigger priority with the company particularly exposed.

“Bosses will be hoping for some kind of US-Mexico accord given they imported $1.6 billion worth of tequila into the states last year. The fact the firm has withdrawn any medium-term forecasts based on the potential impact of tariffs really demonstrates the gravity of the situation.

“Diageo has said they will take measures to try and mitigate the impact of tariffs, but realistically there’s a limit to what cost-cutting and inventory management can do when faced with such a mammoth additional expense.”

Shein and Temu could be hit as Trump closes tax loophole

In the executive order which imposes 10% tariffs on Chinese imports, Trump has included a footnote which closes a tax loophole known as “de minimis” rules.

Historically, this rule has allowed companies to avoid paying duties if their goods are valued at less than $800 and shipped directly to American consumers.

It has allowed Chinese companies like Shein and Temu to sell clothes and products at incredibly low prices.

Analysts have suggested that closing this loophole could benefit Amazon, with consumers buying low-cost items from the US giant instead.

Tariffs could add to existing pain for Chinese economy

The Chinese economy has run into some challenges in recent years, including a property market crisis and slowing growth. Tariffs from the US government now add another headwind to the mix.

Despite this, Kai Wang, market strategist at Morningstar, says the immediate consequences should be limited to specific sectors. These include home appliances, home furnishings, lithium batteries and EVs – all of which have "sizeable exposure to US revenue".

Will Trump and Xi Jinping strike a deal?

A White House advisor previously indicated that Trump and Chinese president Xi Jinping would speak today, however the latest report from the Wall Street Journal refutes this. If the two leaders do speak, it is possible that they will come to some kind of compromise.

"If not, China is likely to devalue its currency to offset the impact of tariffs, as it did in the first trade war," said George Brown and David Rees, both economists at Schroders. "The authorities will be mindful of the risk that a weaker currency exacerbates already-weak domestic sentiment. But the rapid imposition of tariffs also increases the probability of a larger fiscal stimulus to support domestic growth."

Thank you for following our live blog again today. That concludes our coverage for this evening.

We will be reporting live on other news topics this week, including the upcoming interest rate decision from the Bank of England. Our reporting there will begin tomorrow ahead of the announcement on Thursday.

Alternatively, for all things tech-focused, check out our live blog on the Magnificent Seven's earnings. Up tonight is Alphabet, which will be reporting its fourth-quarter results shortly after US markets close.

Trump to announce steel and aluminium tariffs

Good morning and welcome back to our live blog. Another week, another tariff threat from US president Donald Trump.

This time, the president has said he will announce 25% tariffs on all steel and aluminium imports. The move is expected to have the biggest impact on Canada – the largest exporter of steel and aluminium imports to the US. Mexico also exports a large amount of steel to its northern neighbour.

The latest threats come just one week after Trump threatened 25% tariffs on the two countries, before ultimately suspending the threat for a period of a month after coming to border-security agreements with Canadian prime minister Justin Trudeau and Mexican president Claudia Sheinbaum.

Announcement on retaliatory tariffs is also coming

Trump also said that he would make an announcement later this week on retaliatory tariffs. He indicated that these would be imposed on countries who tax US imports, saying: “If they charge us, we charge them”.

How much steel does the US import?

The US imported 28.9 million net tons of steel last year, according to figures from the American Iron and Steel Institute. The top three importers were Canada, Brazil and Mexico.

Overall, the US imports around a quarter of its steel.

Source: American Iron and Steel Institute, based on preliminary Census Bureau data.

How much aluminium does the US import?

The US imported 5.4 million metric tons of aluminium last year, with more than half of this (3.2 million) coming from Canada. The next two biggest importers were the United Arab Emirates (0.3 million) and China (0.2 million), according to data from the US government.

Overall, the US imports around half of its aluminium.

What do Trump's tariffs mean for markets?

“Trump's tariffs on steel and aluminium sold into the US are negative for markets on two levels,” says Russ Mould, investment director at AJ Bell.

“First, it suggests the new US president has only just got started with America’s budding protectionist trade policy. Second, it extends the affected countries beyond Canada, China and Mexico to places like Germany, Brazil, Japan and South Korea.”

He adds: “With the promise of further tariffs later this week, Trump’s actions threaten to cause considerable volatility on the markets over the coming days if there is a tit-for-tat response from affected countries."

Despite this, global stock markets have taken the latest announcements in their stride so far on Monday. Trump quickly U-turned on his threats against Canada and Mexico last week, so it is possible investors are taking a 'wait-and-see' approach.

Impact on the UK steel industry

According to a report from the House of Commons Library, published in October 2024, the UK steel industry contributed £2.3 billion to the UK economy in 2023. This is equivalent to around 0.1% of total UK economic output and 1% of manufacturing output.

In other words, the steel industry isn’t a huge part of the domestic economy, but it is still made up of more than 1,000 companies and supports 40,000 jobs.

The industry has faced challenges in recent years. Excess capacity in the international steel market has driven prices down but costs still remain high. Making steel is incredibly energy intensive, and electricity prices in the UK are higher than in some other countries.

Against this backdrop, US tariffs (if imposed on the UK) could create further pain.

Around one tenth of the UK’s total steel exports were sent to the US last year, according to news outlet Politico. Trade association UK Steel has said that tariffs would be a “devastating blow”, if imposed.

Gold price hits a record high

The gold price has soared to another record high, exceeding $2,900 for the first time today. The latest upward movements have partly been driven by safe-haven buying in response to Trump's tariff threats. Investors are concerned that tariffs could push costs up for businesses, potentially denting profits. If businesses look to pass these costs on to consumers, it could also push inflation higher. Gold is often seen as being a good hedge in periods of market volatility and inflation.

Trump signs tariffs on aluminium and steel

Reports have emerged in the last hour that Trump has now signed a proclamation announcing 25% tariffs on aluminium and steel, as widely anticipated.

The BBC reports him saying: "Today, I'm simplifying our tariffs on steel and aluminium. It's 25% without exceptions or exemptions".

Steel and aluminium tariffs go further than in 2018

During his first term as president, Trump imposed a 10% tariff on aluminium imports and 25% on steel imports, effective from 2018. However, some of these measures have since been pulled back.

Trump ultimately reached a deal with Canada and Mexico a year later, exempting them from the levies.

Joe Biden then introduced further exemptions during his term as president, striking deals with the EU, Japan and the UK to allow them to export a certain amount of the metals to the US tariff-free.

The announcement from Trump today undoes any such exemptions.

Speaking from the Oval Office, Trump said the reintroduction of these tariffs was the beginning of "making America rich again".

More pain for consumers

Trump's argument that tariffs will "make America rich again" contradicts arguments laid out by most economists, who counter that it is usually consumers who pay the price when tariffs are imposed.

A general rule that has been quoted by economists at Goldman Sachs, among others, is that each time the average tariff rate goes up by one percentage point, the rate of core US inflation goes up by around 0.1 percentage points.

More tariffs to come...

Speaking from the Oval Office this evening, Trump indicated that future tariffs could also be announced on cars, pharmaceuticals and computer chips.

That's all for tonight, but we will be back with further news and analysis tomorrow morning. Thank you for joining us.

Market response to Trump’s tariffs

Good morning and welcome back to our live blog. Let’s take a look at how markets have responded to Trump’s proclamation on steel and aluminium last night.

There was some volatility in Asian markets during trading hours on Tuesday as investors digested the implications of Trump’s steel and aluminium tariffs. The Hang Seng Index fell 1.06%, while the Shanghai Composite Index closed 0.12% lower.

In Australia, the ASX 200 ended the day roughly where it started, just 0.01% higher. One constituent, Mineral Resources Ltd, fell 6.93% during the session. The company mines iron ore – one of the main ingredients in steel.

In Europe, markets have largely shrugged off the latest news so far. The CAC 40 (France) and the DAX (Germany) are both in the green this morning, at the time of writing. In the UK, the FTSE 100 hit another record high this morning but has since fallen back.

US markets have not yet opened for trading today, but S&P 500 futures suggest the index could edge lower.

How significant are the latest tariffs in the context of world trade?

Analysis from consultancy Capital Economics suggests the broader economic impact of steel and aluminium tariffs might not be that significant.

“According to data from Intracen, trade in aluminium, steel (and iron) makes up just 3% of world trade even including fabricated products like drums and cans. And within that, exports to the US are just 0.25% of world trade, so these tariffs in themselves are no game-changer,” economists Jennifer McKeown and Hamad Hussain write.

When you drill down to individual economies, Canada is the most exposed country, with impacted exports accounting for around 1% of its GDP. Meanwhile, the impact on China will be “negligible”.

McKeown and Hussain explain: “The US already has high tariffs on Chinese steel (47.5%) and aluminium (32.5%), which means that trade is already limited and the incremental impact of even higher tariffs should be small.

“While China did still send $2.5bn worth of the metals to the US last year, this represents just 0.5% of its exports to the country and 0.01% of its GDP.”

"The big one": are reciprocal tariffs coming?

The latest announcement from Donald Trump suggests that the global trade spat he’s been spoiling for could be imminent.

“THREE GREAT WEEKS, PERHAPS THE BEST EVER, BUT TODAY IS THE BIG ONE: RECIPROCAL TARIFFS!!! MAKE AMERICA GREAT AGAIN!!!” the president posted on his social media platform, Truth Social, earlier today.

“Very simply it's if they charge us, we charge them,” Trump told reporters on Sunday. Effectively, any country that charges tariffs on US imports will have similar levies imposed on their exports to the country.

Trump will provide more detail at a press conference taking place in the Oval Office today at 1pm Eastern time.

Stay tuned tomorrow, as we bring you the detail on what was announced, and how the markets react.

Reciprocal tariffs: what we know

Good morning, and welcome back.

Donald Trump announced his much-anticipated reciprocal tariff regime yesterday. The US president has directed his top trade advisers to devise tariffs on a country-by-country basis, based on the tariffs that those countries charge on US imports, as well as factors such as exchange rates and trade balances.

The memo directing Trump’s advisers asked them to report with a plan within 180 days.

“In almost all cases, they're charging us vastly more than we charge them,” said Trump, adding that “those days are over".

Stay tuned for analysis on the countries that could see the biggest impacts from Trump’s tariff regime.

Which countries will be most affected by reciprocal tariffs?

Trump’s reciprocal tariffs directive replaces a previously proposed imposition of blanket tariffs of 10-20% on all imports into the US. Instead, reciprocal tariffs will likely be based on the tariffs that countries levy on US imports as well as factors like VAT regimes and trade imbalances.

That shifts the picture away from regions like Canada, Mexico and Europe, but has significant implications for Asian and Latin American economies.

“The countries that would feel the real impact of a fully reciprocal tariff policy aren’t the US's biggest trading partners,” says Lale Akoner, global market analyst at eToro. “In fact they’re Asian economies such as India, Indonesia, Thailand, and Latin American countries such as Brazil. That is because these countries impose more tariffs on the US than the US imposes on them.”

We’ll take a closer look at these regions today, and explore the countries that could see the greatest impact.

Asia: reciprocal tariffs put India in the crosshairs

Without knowing the details of what reciprocal tariffs will consist of, there is a degree of speculation about which particular countries will be hardest-hit.

However, India could be one to keep an eye on based on what we know so far.

“Based on a simple calculation that sums VAT rates and the difference in tariff rates, India emerges as the country within Asia that would be hit hardest by a new tariff regime,” writes Gareth Leather, senior Asia economist at Capital Economics.

While most countries in Asia would be harder-hit under the reciprocal tariff regime than they would have been by a blanket 10% tariff, Pakistan, Thailand and Vietnam stand out as the three besides India with a particularly high combination of VAT and tariff discrepancies with the US.

Leather hints, though, that as with previous tariff announcements, this could be another trademark Trump negotiating tactic.

“As we have highlighted previously, Trump has shown a willingness to strike deals,” he writes. “It is notable that India recently cut import duties on imports of motorbikes and bourbon whisky, and yesterday agreed to start trade talks with the US.”

Currency markets unfazed by reciprocal tariff threat

The expectation yesterday was that currency markets might price in upcoming tariffs on the countries likely to be affected, via FX.

However, so far today the reaction in FX markets has been subdued.

“We have seen muted trading of the currencies of countries to be affected the most – India, Indonesia, Thailand and Brazil – in case of a reciprocal tariff,” Lale Akoner, global market analyst at eToro, tells MoneyWeek. “This suggests that traders still see the latest announcements as just a negotiating tool ("escalate to de-escalate").

“Overall, markets currently think that tariffs will be selectively implemented and the US is looking to negotiate first,” she adds.

Trump tariffs and gold prices

One of the tariff announcements this week focused on the key industrial metals steel and aluminium.

But how have tariffs, or the threat of them, impacted precious metals, particularly the price of gold?

“Trump's approach to tariffs is creating a lot of uncertainty in the world's economies, including the United States,” says Stephen Mullowney, CEO of gold mining company TRX Gold. “Gold is seen as a safe haven in uncertain times and is very liquid; thus, it has received a boost in price.

“Trump’s tariffs and threats have also raised the value of the US dollar compared to other currencies.” This has meant that gold prices in non-dollar currencies, like pound sterling, have increased even further.

Finally, and perhaps most importantly, the potentially inflationary impacts of tariffs are a further impetus to the gold price.

“There is an expectation that inflation will remain high in the United States due to the tariffs increasing the cost of goods potentially combined with tax cuts," says Mullowney. "Gold has historically been a good hedge against inflation.”

Thanks for following our blog through a turbulent week for global trade.

We'll be back next week with any further tariff news and updates.

Have a great weekend, from the team at MoneyWeek.

Summary

• Donald Trump’s second term as US president is underway.
• Trump won the election for his second term in November.
• On day one, Trump threatened 25% tariffs on imports from Canada and Mexico.
• Trump has also announced Stargate, a $500 billion artificial intelligence initiative.
• Experts fear that some of Trump's policies could be inflationary, both for the US and the global economy.

Good morning, and thanks for joining our live blog. Dan McEvoy and Katie Williams here to take you through what promises to be an eventful day for global markets, as Donald Trump is inaugurated as US president for the second time.

The Trump timeline

Before we get going on the analysis of what Trump’s second term in the White House could mean for markets, let’s have a look at some key milestones that we’re expecting today. All times are GMT unless specified otherwise.

There will be a service at St John’s Church followed by tea at the White House with the Bidens in the morning, though the Trump-Vance inaugural team have not confirmed precise timings for these.

However, the next item on the agenda – the swearing-in ceremony in the US Capitol – always takes place at midday on the US East coast – so 5pm in the UK.

There will likely be some big moves as Trump takes office, even though there will be no policy passed today. Previous inauguration speeches have given indications of the direction of travel for an administration, and this is likely to be especially so for Trump.

The S&P 500 opened 1.5% for Joe Biden’s inauguration in 2021, but fell back 0.1% during the day from there. With US markets closed for Martin Luther King day today, however, we’ll have to wait until tomorrow to see how the index reacts this time around.

READ MORE: Is the US economy set for success?

Tariff turbulence

The market turbulence that could accompany Trump’s inauguration is in no small part related to the inherent unpredictability of his administration, indeed of the man himself.

“UK investors should brace for some volatile patterns of trading on the financial markets,” says Susannah Streeter, head of money and markets, Hargreaves Lansdown. “Some of the turmoil we’ve already seen on financial markets is likely to continue as speculation swirls about Donald Trump’s trade policies once he’s back in the White House.”

Some of Trump’s stated aims – like reducing corporation tax and streamlining the government’s bureaucracy – are ostensibly business-friendly.

However, his proposal of levying steep tariffs on imports across the board have spooked markets.

“US exporters are likely to be hit by higher tit-for-tat duties in return if Trump introduces widespread tariffs,” says Streeter. “It’s likely that a fresh round of trade wars will be inflationary as the higher tariffs feed through to higher prices for goods in American shops. This, in turn, may add to clamour for higher wages. Already concerns that this will drastically limit the Federal Reserve’s capacity to reduce interest rates has rattled bond markets, pushing up government borrowing costs.”

READ MORE: Will Trump's tariffs trigger high inflation in the US?

The art of the deal

It’s far from guaranteed that Trump will be able to enact tariffs, or that he’ll even try to, on the scale that has been rumoured.

The Washington Post reported in early January that Trump’s aides were discussing a pared-back tariff regime that would only apply to critical imports. While Trump was quick to dismiss the rumours, the story plays into a general perception that Trump’s bark is often worse than his bite.

Trump has as good as confessed, in his book Art of the Deal, that he often adopts a seemingly-ridiculous stance at the outset of a negotiation, in order to obtain a better price. Having promised to take a heavy-handed approach to foreign policy, Trump’s bluster about tariffs could all simply be a negotiating tactic in order to eke out more from the global leaders he will be speaking to early in his tenure than he might otherwise.

“No-one, but no-one, knows what Trump is going to do,” Russ Mould, investment director at AJ Bell, told MoneyWeek.

There is also the fact that any policies he tries to introduce will need to be negotiated through Congress. With a tiny Republican minority in the House, that’s not a given, even for a veteran dealmaker like Trump.

With all that in mind, Mould suggests that investors shouldn’t try too hard, just yet, to protect their portfolios against potential Trump tariffs.

“We still don’t know whether Congress will help or hinder [a tariff regime],” he says. “Until we know what Trump is proposing and what is actually implemented, it is very hard to form a view, either way.”

Trump-friendly funds

While some experts advise against trying too hard to play the Trump presidency, t’s good to have an idea which investments could provide a measure of protection against any negative fallout, whether that’s to add to a portfolio now or to keep an eye on as the administration’s agenda unfolds.

“Trump will have a lot on his plate when he returns to the White House, facing challenges ranging from a heavily indebted America with a soaring budget deficit to two major conflicts on the global stage,” says Alex Watts, fund analyst at interactive investor. “Beyond the volatility that these challenges may bring, investors can start to identify areas and sectors that might benefit from the policy direction of Trump 2.0.”

Watts picks out the Artemis US Smaller Companies Fund, the FTF Clearbridge Global Infrastructure Fund and the Neuberger Berman US Multi-Cap Opportunities Fund as funds that could benefit from Trump’s domestic focus and particularly his intention to rebuild US infrastructure.

Watts also picked out digital assets, particularly Bitcoin, as an asset class that responded positively to Trump’s election win, largely as Trump is expected to be friendly to the space.

Although Paul Angell, AJ Bell head of investment research at AJ Bell, echoes Mould’s view that investors shouldn’t “twist and turn with the wind” of political shifts or attempt to “second guess what the next four years could mean for global stock markets”, he does offer up four funds that “may remain on the radar of investors as the US undergoes a change in presidential administration”: Artemis US Select, Artemis US Smaller Companies, iShares Core S&P 500 ETF and JP Morgan US Equity Income.

Victoria Hasler, head of fund research, Hargreaves Lansdown, meanwhile, recommends that investors consider Artemis US Smaller Companies and Rathbone Global Opportunities – which offers global exposure alongside “expert” active management from James Thompson – and Troy Trojan, a defensive fund that offers “some shelter in turbulent times”.

Ripples from across the pond

What have Trump’s policies got to do with the pound in your pocket? Given that the US is our largest trading partner, accounting for 22% of UK exports and 13% of UK imports in 2023, the answer to that question is: quite a lot.

“Donald Trump threatened to introduce universal tariffs of 10-20% on all imports (and up to 60% in the case of Chinese imports),” says Jason Hollands, managing director at Bestinvest, the online investment platform. “If such measures are quickly introduced, this would prove a significant financial shock.”

The impact of any direct tariffs imposed on the UK isn’t the only thing you need to consider. Supply chains are intricate, global webs of interdependence. This means businesses and consumers would also feel the effects of a wider trade war, including measures imposed on the likes of China and the EU.

By disrupting global trade, tariffs would push up costs for businesses throughout their supply chain and add to inflationary pressures felt at home in the UK. Inflation is already expected to pick up again in 2025 thanks to other pressures, like rising energy prices and tax changes announced in the Autumn Budget. Wide-ranging tariffs could compound the issue further.

Trade secretary: UK in “greater” danger than some other countries

Trade secretary Jonathan Reynolds has expressed concern about the possibility of a trade war, arguing that the UK could be particularly vulnerable. “The UK is a very globally-oriented economy so the exposure and the danger to the UK is actually greater than even some comparable countries,” he said.

Despite this, he told Sky News that Trump was more focused on China and the EU as a result of trade deficits with those regions. He also expressed optimism about opportunities to further improve US-UK relations.

“We’re well prepared for this, we’ve got a good argument to make, and I think there is a chance, actually if we play this right, to get an even better relationship out of some of these things that have been put forward,” Reynolds said.

FTSE 100, gold and Bitcoin up

The FTSE 100 has gained 0.3% this morning, approaching a new intra-day high in the process.

“After reaching an all-time high on Friday there seems little to spark a pull-back, with US markets shut for Martin Luther King Day,” says Susannah Streeter, head of money and markets, Hargreaves Lansdown. “With the UK no longer in the eye of the storm when it comes to market turmoil, it’s helping improve investor sentiment.”

“However, all eyes will be on Donald Trump’s inauguration later as the 47th President of the United States and his comments are likely to hold sway on markets.”

His signalling vis-à-vis any potential tariff regime is likely to be the biggest factor here. The uncertainty around Trump’s plans for the US and, by extension, the global economy has pushed gold up 0.1% this morning, as investors make for the safe haven asset in the face of an unpredictable few months.

Bitcoin is also making strides: the cryptocurrency is up 2.9% this morning and 15.4% in the year to date, to record highs of around $108,000, as investors expect the new administration to take a crypto-friendly stance.

Dollar nears new highs

Besides their more digital incarnations, regular currencies have made some significant moves in the run-up to Trump’s inauguration.

The US dollar has neared new highs in recent weeks, as expectations rose for higher interest rates and superior growth in the US, compared to other regions.

The US dollar index is a measure of the value of the US dollar relative to a basket of foreign currencies. Past performance is not a guide to future performance and may not be repeated.

“Any imposition of tariffs would tend to be supportive of the dollar because it would go some way towards equalising out the impact of tariffs on trade and activity,” says David Rees, senior emerging markets economist at Schroders. “We also expect support from interest rate differentials to re-emerge, so a stronger dollar is likely to remain for a while longer.”

However, the US dollar index has fallen 0.3% this morning, while the pound has gained approximately the same amount against the dollar.

More than 200 executive actions expected today

Trump is expected to sign more than 200 executive actions today. The BBC reports that this will include executive orders, which are legally binding, as well as other directives like proclamations, which are not.

The incoming president has previously indicated that trade tariffs could be among his “day one” policies. Other areas of focus could include immigration and the US border, reversing Joe Biden’s climate policies, and dissolving existing diversity, equity and inclusion policies.

An early winner

One early winner from the Trump presidency is ByteDance, the Chinese-headquartered firm that owns video-sharing app TikTok.

A Biden-era ban on the app was temporarily enforced on Saturday, blocking US users from the app.

By Sunday, however, Trump had vowed to reinstate the app, and access was resumed.

It’s a little surprising, especially for anyone that thinks a protectionist, anti-China stance will offer a straightforward categorisation of Trump’s agenda. Meta (NASDAQ:META) shares gained 2% on Friday, as ByteDance’s appeal against the ban was unanimously rejected.

Meta’s CEO Mark Zuckerberg has recently signaled his support for Trump by removing factcheckers across its platforms, including Facebook and Instagram – much as close Trump ally Elon Musk did when he took over Twitter (now ‘X’).

Trump has seemingly turned down the first chance to return the favour, though, in reinstating one of Meta’s biggest social media rivals.

“As of today, TikTok is back,” the incoming president declared at a “victory rally” in Washington DC on Sunday.

What did the S&P 500 do in Trump’s first term?

US markets are closed today in observance of Martin Luther King Jr. Day, which is a federal holiday. But what might we expect from the S&P 500 based on Donald Trump's previous term in office? In short, the outlook appears positive. During the first 12 months of Trump's first administration, the S&P 500 increased by 19.4%, on the back of a 5% rally during his first 100 days in power. During the whole of Trump's first term, the S&P 500 jumped almost 70%.

Tesla’s “Trump bump”

Tesla has enjoyed a significant “Trump bump” in recent months. The share price is up more than 70% since the start of November, a remarkable turnaround for a company that spent much of 2024 in the red. Retail investment platform Interactive Investor reports that Tesla has been the third most-bought investment on its platform since Trump’s election win on 6 November.

The share price hit a new all-time high in mid-December, before losing some of these gains in the final two weeks of the year. It has been picking up again over the past couple of weeks in the lead-up to the inauguration.

The latest share price moves are perhaps unsurprising. Tesla’s chief executive Elon Musk has a close relationship with Trump and has been given a key advisory role at the heart of Washington, leading the new Department of Government Efficiency. The New York Times reports that Musk is expected to use office space in the White House complex, giving him “significant access” to the incoming president.

Do tariff concerns miss the point?

As always with Donald Trump, the big statements have garnered the most attention. From promising the biggest mass deportation of migrants in US history to hinting he might invade Greenland, he is never far away from a controversial declaration.

As such, his promise to impose swingeing tariffs have dominated the financial discourse ahead of his inauguration.

In the view of David Coombs, head of multi-asset investing, Rathbones Asset Management, this distracts from some of his more substantial objectives.

“There’s a risk that Trump’s touted policies (big tariffs on trade, big tax cuts for households and businesses, and a clampdown on both legal and illegal immigration) will send inflation higher,” he says. “We think people are putting too much weight on these areas and ignoring his ambitions on slashing government spending.

“Trump often talks big at the outset, only to negotiate a compromise at the end. To that end, some of the tariffs may be much smaller or not happen at all. Similarly, tax cuts may not be as large as some hope. But if he and Elon Musk’s Department of Government Efficiency manage to slash a significant amount of federal spending, the tax-cuts’ net effect on inflation may be negligible.”

Executive orders: how does Trump compare to previous presidents?

Donald Trump has said he will sign “dozens of executive orders, close to 100” within “hours” of taking office.

The figure the BBC is reporting is 200 executive actions – although this is expected to include things like proclamations as well as legally-binding executive orders.

In his first term as president, Deutsche Bank analysis shows that Trump signed 55 executive orders per year, on average. This is the highest number from any president since Jimmy Carter.

The all-time record came from Franklin D. Roosevelt in the 1930s and 40s, who averaged 307 executive orders per year.

“Theodore Roosevelt’s presidency marked the start of a ‘progressive era’ with activism in antitrust enforcement and conservation which bypassed a gridlocked Congress,” says Jim Reid, research strategist at Deutsche Bank.

Reid thinks Trump 2.0 could “easily” result in “the highest number of EOs issued since the first half of the 20th century”.

Average number of executive orders signed per year by each American president

Cathie Wood: equities bull market will broaden

Renowned disruptive technology investor Cathie Wood, CEO of ARK Invest, thinks that Trump’s presidency won’t just benefit the megacap big tech stocks.

Instead, she believes, the incoming president’s tax-cutting, regulation-slashing agenda will play out to the benefit of small- to mid-sized companies.

“The bull market in equities is likely to broaden out from just a few cash-rich, large cap stocks to a broad swath of stocks that have been hampered by the supply shocks, the record-breaking burst in interest rates, and the rolling recession that have characterized the last four years,” she says.

Bond markets ought to be calmed by the prospect of lower deficits, and while “the consensus view today is that rapid deal growth will case inflation… history suggests otherwise”, she says.

However, the transition from the Biden to the Trump regime could be an uncertain time for the market, adding to the “wall of worry that has kept the markets on edge recently.

“Will tariffs trigger another bout with inflation? We think not: instead, those tariffs should be selective and incremental, their discrete effects ultimately displaced overwhelmingly by tax cuts, deregulation, and dollar appreciation. Indeed, we believe the market is likely to discount a successful Trump Administration, which could turn out to be one of the most successful administrations since the Reagan Revolution,” says Wood.

Trump has now arrived at the US Capital for the inauguration ceremony, which will begin at 17:00 GMT (12:00 EST).

Tesla: what can investors expect when markets open tomorrow?

We previously pointed out that Tesla has been one of the biggest beneficiaries of Trump’s election win. The share price is up more than 70% since the start of November. US stock markets are closed today, but what can we expect when the market opens tomorrow?

“Investors might anticipate a positive start for Tesla shares on Tuesday due to the recent bullish sentiment around its association with the incoming Trump administration, potential regulatory ease, and expectations of growth in autonomous vehicle technology,” says Sam North, market analyst at investment platform eToro.

“However, specific performance will also hinge on broader market sentiments and any news or developments over the long weekend. With all that said, it would be a shock to see Tesla trading significantly lower on Tuesday,” he adds.

Investors could be set for disappointment over the longer term, though. Once Trump’s election win is old news, sentiment will almost certainly die down and the focus will return to Tesla’s financials. The company’s next earnings call will take place on 29 January.

We take a closer look at the stock in: “Should you invest in Tesla?”

No day one tariffs

The Wall Street Journal has reported that Trump won’t impose any new tariffs today. The dollar has weakened slightly as a result.

Trump is instead planning to issue “a broad memorandum on Monday that directs federal agencies to study trade policies and evaluate US trade relationships with China and America’s continental neighbors,” the journal said.

Trump’s inaugural address

Trump has just delivered his inaugural speech.

“During every single day of the Trump administration, I will very simply put America first,” he said shortly into it. But what exactly does that mean – and what are the implications for your money?

"Drill baby, drill"

“I will direct all members of my cabinet to marshall the vast powers at their disposal to defeat what was record inflation and rapidly bring down costs and prices,” Trump said.

He blamed the inflation crisis on “massive overspending and escalating energy prices” and said he was declaring a “national energy emergency” to help fight inflation.

“We will drill baby, drill,” he added.

What isn’t mentioned is that inflation has been a global phenomenon, with prices spiking in the wake of the coronavirus pandemic as economies ground back into action after unprecedented disruption.

“We will revoke the electric vehicle mandate”

Trump also used his inaugural address to confirm he will revoke the “electric vehicle mandate”. It will be interesting to see if (and how) Elon Musk responds.

Tesla’s share price has surged since Trump’s election win. Investors hope the close relationship between the two will translate into a more friendly regulatory environment as Tesla looks to launch initiatives like autonomous robotaxis.

However, this particular move is bad news for electric car specialists. It seems likely Trump is referring to the Environmental Protection Agency rules which would have required manufacturers to radically reduce their greenhouse gas emissions on certain vehicles by 2027.

Shares in European carmakers that are trading today, like Volkswagen (GER:VOW3) and Stellantis (PAR:STLAP), jumped earlier this afternoon, as news that Trump could cancel the mandate emerged. Traditional carmakers like these have been struggling to meet the kinds of EV numbers that the mandate requires.

That’s everything on the live blog for this evening. Join us again tomorrow for more updates and analysis as Trump’s second term begins – as well as the all-important reaction of the US stock market.

Good morning, and welcome back to our live coverage of the start of Donald Trump’s second term as US president.

The (money) headlines overnight:

• Trump has threatened to impose tariffs of up to 25% on imports from Canada and Mexico as early as 1 February;
• Having postponed the ban on TikTok by 75 days, Trump also threatened to levy 100% tariffs on Chinese imports unless at least 50% of the app is sold to a US company;
• He has also suggested that EU imports will be hit with large tariffs unless the bloc buys more US oil;
• Trump revoked Biden’s 2023 executive order on artificial intelligence (AI), which required AI developers to share safety tests with the US government before releasing new products to the market;
• An executive order freezing government hiring and a directive exhorting federal agencies to combat inflation, specifically by expanding the housing supply and cutting the regulatory cost of housebuilding, have also been signed, according to the BBC.

We’ll bring you all today’s comments and analysis as Trump’s second day in the White House unfolds.

A new Reagan?

While Cathie Wood thinks that Trump’s second term could be the most successful since the Ronald Reagan era, there are some differences in the macro backdrop that each president will have to contend with.

Reagan “won two terms, from 1981-1985 and then 1985-89 and his reforms won huge plaudits from investors as America shook off the inflationary economic malaise of the 1970s,” says Russ Mould, investment director at AJ Bell. He was helped in doing so by “a large dose of interest rates and tight monetary policy from the US Federal Reserve.

“Whether this iteration of the Fed, under chair Jay Powell, has quite so much appetite, or room, for maintaining such a monetary squeeze is open to debate,” Mould adds. The Fed is now more interventionist than it was during the 1980s, with its frequent injections of liquidity a source of frustration for Trump during his first term.

Further, the level of the US deficit is now far higher than during the Reagan administration. “The US Federal deficit was barely 30% of GDP in 1981, compared to 120% now, [which left] Reagan with so much more room for fiscal manoeuvre,” says Mould.

Finally, the valuations at which the S&P 500 is trading as Trump enters office give it less room for further growth.

“When Reagan took office on 20 January 1981, the cyclically adjusted price earnings (CAPE) ratio was 9.3 times, not 37.0 times as it is now,” says Mould.

“Any unexpected shocks, such as those suffered during the Nixon, Carter and Bush presidencies, or simply a divergence from the current preferred narrative of cooling inflation, a soft economic landing and lower interest rates, could therefore have a sizeable impact, and not necessarily a positive one.”

How will US markets open?

While the US markets were closed yesterday for Martin Luther King day, US stock market futures indicate a positive reaction to Trump’s inauguration. S&P E-mini Futures contracts have risen by more than 0.5% over the past 24 hours, while Nasdaq 100 futures are making strong gains this morning.

Tesla shares are up more than 2% in pre-market trading according to Nasdaq data.

Has immigration overshadowed trade policy?

“For someone who has talked repeatedly about wanting American companies to buy American goods and to deter foreign countries from profiting from the US, it was a surprise to see tariffs take a back seat as Trump put his new powers to use,” says Russ Mould, investment director at AJ Bell, on the president’s inauguration day.

While the new president did find time to threaten 100% tariffs against Chinese imports, “Chinese markets took this threat in their stride, with key equity indices holding firm. This suggests investors don’t believe Trump would be so bold as to take the nuclear option on tariffs”, according to Mould.

Instead, Trump’s day one focused more strongly on immigration, and this could have major implications for the US economy. “The one area where Trump took decisive action was illegal immigration and this poses a big threat to labour costs in the US. It threatens to reduce the pool of workers for construction and agricultural industries, meaning companies might have to pay more to attract staff.

“Trump promised to lower prices for the American public, yet already on day one we’ve got policies in action that have inflationary consequences. Companies presented with extra costs will simply pass them on to the customer through higher prices,” says Mould.

A few other potential big movers to keep an eye out for when the US stock market opens in about two hours:

• Apple (NASDAQ:AAPL), down over 2% in pre-market trading;
• Broadcom (NASDAQ:AVGO), up around 1.4% pre-market;
• Rocket Lab (NASDAQ:RKLB), a space exploration firm that has performed joint missions with Elon Musk’s SpaceX, is up 6% pre-market.

US Stock market opens

The S&P opened 0.29% up in its first session since the inauguration of Donald Trump. The Nasdaq 100 opened around 0.54% up.

Tesla shares are plummeting – down almost 3% in the opening minutes of trading. Trump’s social media platform, Trump Media & Technology Group, has also fallen nearly 10%.

Rocket Lab is up around 15% – presumably following Trump promising to send astronauts to Mars during his term.

MicroStrategy, frequently seen as a proxy bitcoin play, is down over 5% as crypto was left out of yesterday’s flurry of executive orders.

The best and worst US presidents (according to the stock market)

Our sister site Kiplinger has published some analysis on which US presidents the US stock market performed best under.

Herbert Hoover (1929-1933) is in last place, with an eyewatering annualised loss of -30.8% (S&P 500, price only data). He took office just before the historic Wall Street crash of 1929, which was followed by the Great Depression.

Topping the list is Calvin Coolidge (1923-1929), with an annualised stock market return of 26.1%. This is based on the Dow Jones Industrial Average rather than the S&P 500 due to data availability.

“A cynic might point out that Coolidge was extraordinarily lucky to have taken office just as the 1920s were starting to roar… and to have retired just as the whole thing was starting to fall apart,” says Kiplinger’s Charles Lewis Sizemore.

Indeed, it is worth remembering that politicians aren’t generally the main drivers of markets. Factors like underlying economic growth, inflation and interest rates tend to play a bigger role. Where politicians can have an impact is through things like taxation and regulation, both of which Trump has promised to cut.

What’s happening with the Bitcoin price today?

The Bitcoin price surged to around $109,000 yesterday as Donald Trump was inaugurated, but has since fallen back slightly and is around $106,000 at the time of writing.

“Bitcoin has gone bananas after Trump launched his own cryptocurrency on Friday,” said Russ Mould, investment director at AJ Bell. “It’s got crypto fans fired up in the hope that digital currencies will go mainstream.”

The Bitcoin price has also risen in recent months based on the belief that Trump will usher in a more relaxed regulatory environment.

Gary Gesler, the former chair of the US Securities and Exchange Commission (SEC), stepped down yesterday and was replaced by Republican SEC member Mark Uyeda to act as interim chair. Gesler was known for his tough stance on crypto.

A report from Reuters says that acting chair Uyeda and another SEC commissioner, Hester Peirce, are “expected to kick-start a cryptocurrency policy overhaul as early as this week”.

Longer term, Trump has said he will nominate crypto-friendly Paul Atkins to fill the role of SEC chair.

Good morning, and welcome back to day three of Donald Trump’s second tenure as US president.

The overnight headlines:

• Oracle (NASDAQ:ORCL) shares gained 7.2% yesterday as chief technology officer Larry Ellison joined Trump in announcing a joint venture with OpenAI and SoftBank (TYO:9984) to build out AI infrastructure in the US;
• Trump Media & Technology Group (NASDAQ:DJT) fell 11.1% on Trump’s first trading day in office;
• Trump has halted over $300 billion worth of US green infrastructure funding.

More news and analysis coming soon.

Where is gold going?

Gold prices have climbed around 2% so far this week, with gains accelerating yesterday morning.

The uncertainty that has accompanied Trump’s return to the White House, particularly the disruptive nature of many of his early actions, could provide a tailwind for the traditional safe haven asset.

“Trump’s plans include a stronger US economy and lowering the US deficit, which would lead to a stronger dollar,” Joe Cavatoni, senior market strategist, Americas at the World Gold Council, tells MoneyWeek. This would imply weakness for gold, given that gold prices are expressed in dollars.

However, this is balanced against the potentially inflationary aspects of Trump’s agenda. “If potential tax cuts, higher spending and tariffs come to fruition, there may be an impact on the Fed's rate cycle that influences gold price performance throughout 2025,” says Cavatoni. “We'll know more about how the Trump administration may affect prices in the next three to six months once there is more clarity on policy.”

How likely are tariffs on Canada and Mexico?

Before the inauguration it was difficult to assess how serious Trump was about any given policy. As anyone who has ever followed politics knows, campaign promises are rarely worth the paper they’re written on (see Labour’s commitments not to raise taxes on working people).

Trump is particularly hard to read, given his penchant for starting very high in anything resembling a negotiation.

However, now that he’s entered office, a clearer picture is starting to emerge. While a mooted 10% universal tariff doesn’t seem to be on the immediate agenda – “we’re not ready for that yet,” he said on day one when asked about it – steep tariffs on imports from Canada and Mexico do seem to be high on his to-do list.

“I think we’ll do it February 1st,” he said of a 25% levy on imports from both countries.

“President Donald Trump’s latest threat against Mexico and Canada raises the possibility that tariffs come even earlier than we expect,” writes Stephen Brown, deputy chief North America economist at Capital Economics in a research note.

The implications of such a policy coming into effect are huge. “Exports to Canada and Mexico account for 38% of the [US] total, so there would be greater costs to the US of potential retaliatory tariffs,” says Brown. Moreover, “since imports from Canada and Mexico account for 35% of the total, the impact of a 25% tariff on those countries would be only slightly smaller than a 10% universal tariff and would temporarily boost CPI inflation by close to 1%.”

These inflationary impacts – particularly hitting imports of energy and food – could be “unpopular with voters”, according to Brown – but it doesn’t seem like that will stop Trump.

Will “cautious optimism” last for the pound?

Big talk of tough tariffs might have boosted the dollar, but it hasn’t been so straightforward during Trump’s first few days in office.

After initially gaining to a three-year high, the Dollar Index (DXY) “has shown signs of retreat, indicating that much of the expected negative impact from Trump's policies might already be reflected in the exchange rates,” says Sam North, market analyst at eToro.

This has seen the pound gain around 0.9% against the dollar this week.

However, North warns that we shouldn’t get too comfortable with this dynamic.

“This cautious optimism around the pound could be short-lived, depending on further clarifications on trade policy from the Trump administration,” he tells MoneyWeek.

Trump and tech

The Stargate AI project is one of the more eye-catching announcements of Trump’s first few days in charge as far as the stock market is concerned.

According to Ben Barringer, global technology analyst at Quilter Cheviot, the project “sets the tone for AI progression over the coming years.

“The expected $500bn backing is hugely significant and marks an escalation in the AI arms race… Companies involved in supplying the technology and infrastructure for Project Stargate are well-positioned to benefit significantly.

“For investors in the AI space, this announcement highlights a wealth of opportunities as the competition to dominate the sector intensifies, adds Barringer.

Positive results from Netflix (NASDAQ:NFLX) have given an additional lift to US tech stocks in Trump’s first week. However, Sam North, market analyst at eToro, warns that there could be something of an over-concentration into tech stocks as things stand.

“Market breadth remains narrow, with gains largely concentrated in tech and communication services, while most other sectors lag, indicating a sector-specific rather than a broad market rally,” he says.

That concludes our live coverage for today, thank you for joining us. We will return tomorrow to keep you updated with the latest analysis as further policy details are revealed.

Good morning, and welcome back to the live blog.

Markets have made more cautious moves this morning. The FTSE is trading sideways, as markets await more decisive updates from Donald Trump's new administration.

"Investors are still weighing Trump’s tariff talk, though history suggests his bark often echoes louder than his bite," says Matt Britzman, senior equity analyst, Hargreaves Lansdown. "Investors [are] gradually shrugging off his strong tariff rhetoric as a calculated bargaining ploy."

Stargate: a shot in the arm for AI

Lets bring a little more detail on Stargate, one of the more eye-catching announcements of Trump’s tenure so far, especially for anyone with one eye on AI investments.

John Higgins, chief markets economist at Capital Economics, explains that “Stargate will be a new private company that intends to invest $500 billion over the next four years building new AI infrastructure for OpenAI in the US.

“The initial equity funders will be Softbank (with financial responsibility), OpenAI (with operational responsibility), Oracle, and MGX. Whether that much will ultimately get spent remains to be seen.”

The investment will largely be poured into new data centres to train AI models, as well as increased spend on component products such as semiconductor chip facilities (with a view to bolstering the country’s domestic supply) as well as new power plants (data centres being power-hungry beasts).

Higgins expects AI to make a quick impact on the S&P 500, albeit a slower one in the wider economy. “The new president seems much less keen than his predecessor on imposign checks and balances on the spread of AI. Since taking office, Trump has already revoked, among others, Biden’s Executive Order (EO) 14110 (Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence).

“Donald Trump’s ringing endorsement of Stargate is another shot in the arm for Artificial Intelligence (AI) in the early days of his second presidency,” he writes.

Musk and Altman clash over Stargate

Stargate has caused something of a spat between two of the people that might reasonably have been expected to be closest to it.

Tesla CEO Elon Musk – arguably the face of big tech within the new Trump administration – and Sam Altman, CEO of ChatGPT developer OpenAI, the AI company at the centre of the new $500 billion AI infrastructure venture – clashed yesterday over Musk’s somewhat surprising criticism of the initiative.

Musk, who co-founded OpenAI before stepping down in 2018, wrote on Tuesday that he had it “on good authority” that SoftBank had secured less than $10 billion to invest in the project. “They don’t actually have the money,” he posted on X in response to OpenAI posting about the initiative.

Altman replied on Wednesday that Musk’s claim was “wrong, as you surely know”.

What could happen to crypto?

Bitcoin prices surged in the immediate aftermath of both Donald Trump’s inauguration and, back in November, his election win. Investors expect the new US president to take a more crypto-friendly stance than any previous president, but what could that actually mean in practice?

Richard Werner, a partner at law firm BCLP with experience in the crypto and NFT domains, tells MoneyWeek that legislative changes could include a narrowing of the Securities and Exchange Commission’s focus to centre entirely on fraud, and that “the likelihood of a legislative package for the regulation of digital assets being passed by the US Congress has greatly increased”. At present, the US Federal government has no clear categorisation of cryptocurrencies, something which crypto advocates argue is standing in the way of more widespread adoption.

However, Werner cautions against speculating on future good news in crypto. “The history of Bitcoin is one of extreme price volatility. There is little reason to think this won’t continue and other digital assets, such NFTs during their 2021-22 heyday and meme coins more recently, have, if anything, been even more unpredictable.”

Underscoring this, perhaps, is the fact that the price of the Official Trump meme coin ($TRUMP) has more than halved since its peak on Sunday, the day before its real-world manifestation took office. Bitcoin has also lost most of its gains since Monday, with official announcements on crypto regulation in short supply so far.

Thanks for following our reporting on the inauguration of Donald Trump, and the major policy announcements from his first few days in office.

We’re going to end the live blog here, but we’ll be returning stateside next week for in-depth coverage of the stock market, as the Magnificent 7 start to announce their earnings.

Three decades before he was tapped to lead the US Treasury department, Scott Bessent was asked to “break” another country’s financial system, says The New York Times. Then 29, he played a key role in financier George Soros’s big bet against the Bank of England (BoE) in 1992, which “crushed” the pound – earning Soros’s fund $1 billion – and forced the UK government to pull sterling out of the European Exchange Rate Mechanism.

Unsurprisingly, given “the extreme ideological differences” between the veteran financier and the president-elect, Donald Trump made no mention of his new pick’s Soros connection. Yet it was that notorious trade – and an equally audacious raid on the Japanese yen in 2013 – that has defined Bessent’s career, providing what some see as his “crucial credential” for the Treasury role.

Who is Scott Bessent and how did he become Trump's Treasury secretary?

Bessent – who in recent years has been running his own macro fund, Key Square – “could see the vulnerabilities in a way that most other people in the financial markets didn’t see”, observed a former colleague. Another credits him with being “so good at figuring out the ‘butterfly effect’”. Certainly, his pedigree as a global investor has eased the worries of business leaders and markets, says CNN. In a crowded field, he stood out as the “reasonable and pragmatic” candidate: a safe pair of hands. While signalling support for Trump’s policies and projecting “the obsequious loyalty Trump enjoys”, Bessent appears “to care deeply about containing government debt”, says The Economist, and he has a reassuringly breezy take on tariffs – viewing them as a “maximalist” negotiating tool that can be pared back during talks with trading partners. “It’s escalate to de-escalate,” he told the Financial Times.

Bessent, 62, grew up in small-town South Carolina and graduated from Yale in 1984. He “stumbled into a career on Wall Street”, says Forbes, after a meeting with Soros’s first partner, James Rogers. The Quantum Fund sent Bessent to London, where he immersed himself in the UK economy, focusing in particular on a housing market then dominated by unfixed mortgages, says The New York Times. His intelligence proved crucial to Soros when weighing up how far he could push the BoE before it would raise rates to defend the pound. Bessent’s stint in London formed the basis of another “close friendship” that would stand him in good stead, says the Daily Mail. A big supporter of the Prince’s Trust, he became close to the current king and queen, especially after Princess Diana’s death in 1997, and “was part of the plan to improve Camilla’s image”.

What's next for Scott Bessent?

Bessent’s links with the Old World still run deep, says The South China Morning Post. He is married to former New York City prosecutor John Freeman, and the couple’s two children are currently studying in Europe. Indeed, one reason why they put their Charleston mansion on the market, for a reported $22.25 million, was to spend more time there. Still, “Washington is calling”. His success there will depend on how much independence he will have, says the FT. Some have also expressed doubts about how a bookish, cerebral type with no government experience will fare managing a department employing 100,000.

Bessent, who has called Trump an “orange swan”, with reference to so-called black-swan events that unexpectedly move markets, hasn’t spoken with Soros for years, says The Wall Street Journal. Paradoxically, his past association with the financier is “a positive for Trump”, who is impressed by the billions Soros has made. But for Trump’s more extreme supporters – who have made Soros the focus of lurid conspiracy theories – Bessent’s past may prove troubling. One step wrong and he risks being tarred with the Trumpist sin of colluding with the enemy. He must tread carefully.

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Shares in big vaccine producers have slumped since Donald Trump asked Robert F. Kennedy (RFK) Jr. to lead the Department of Health and Human Services, says The New York Times. Kennedy, known for his “divisive” views on public health, including “scepticism” about vaccines (as well as pesticides and water fluoridation) is to lead “a huge department… whose regulations affect America’s food and medicine choices”.

How could RFK Jr impact the US healthcare industry?

Ironically, picking such a well-known vaccine sceptic may be a form of “political retribution” by Trump, who claims that the vaccine makers “sat on positive Covid jab test results until after he had lost the [2020] election”, says the Daily Telegraph. He furthermore accused the US Food and Drug Administration (FDA), which is also likely to be in Kennedy’s crosshairs, of not wanting to give him a “vaccine win prior to the election”.

Installing RFK Jr in an official administration role “may be difficult”, as his anti-vax views have been so extreme that they led to bans on YouTube and Instagram, says Robert Cyran on Breakingviews. That “might preclude confirmation even in a Republican-led Senate”.

However, even if he only ends up serving as a senior advisor, it would still give him “plenty of scope to target the pharmaceutical and related industries”. While RFK has said in interviews that “he wouldn’t take away anyone’s vaccines”, he reportedly wants to remove product liability protection from vaccines, a step that might have a “similarly harmful effect”.

Whatever role Kennedy eventually plays, even his presence within the administration could “erode public trust” in vaccines, “put up roadblocks to the approval of new vaccines and prevent the CDC from recommending any vaccines that make it through the approval process”, says Morningstar’s Karen Andersen. This, in turn, could mean that certain US states could “waver” in support of broad mandates for childhood vaccines. Still, any reduction in projected US vaccine sales would not be “long-lasting”, and so this should not provide “a significant hit” to drug companies’ valuations.

The industry hopes that RFK’s influence may be cancelled out by other “smart people” advising Trump, say Ian Johnston and Oliver Barnes in the Financial Times. They could restrain RFK, while there may be increased benefits from the stockpiling of certain vaccines for defence purposes.

Vivek Ramaswamy, appointed alongside Elon Musk to oversee a state efficiency drive, has also been a big fan of reducing red tape in the drug approval process, accusing the FDA of erecting “unnecessary barriers to innovation”.

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Investors have been pumping US stocks into their portfolios over the last few months ahead of the US election, with stocks like Tesla, Nvidia, Trump Media and Microsoft faring well.

Overall, the US stock market responded exuberantly to news that Donald Trump had won a second term in the White House. The S&P 500 gained 2.5% on 6 November, the day the election result was announced, and tipped over 6,000 points for the first time in its history over the following days.

Dan Coatsworth, investment analyst at AJ Bell, cites data from the firm’s platform that shows trading volumes on the day were double their average levels and that buy and sell trades tripled their average value.

This tallies with data from the stock market more generally. Trading volumes for the S&P 500 reached 6.3 billion on the day, their highest level since 20 September.

Top 10 most traded US shares on election result day

These are the 10 most-traded US stocks

• Tesla
• Nvidia
• MicroStrategy
• Palantir
• Coinbase
• Amazon
• Trump Media
• Super Micro Computer
• Microsoft
• MARA Holdings

Source: AJ Bell, 6 November 2024. Based on net trades.

Tesla was the most-traded stock, but more people sold it than bought it on AJ Bell’s platform.

“Bears might have taken the view that Trump will be the anti-green leader of the Western world, rolling back elements of the Inflation Reduction Act”, says Coatsworth. The IRA, as it is usually known, was intended to promote clean energy businesses and provides a tax credit to US-based electric vehicle firms. Tesla could lose out on this if Trump were to cut this credit, as he has previously indicated he might.

However, on 12 November Trump confirmed that Tesla’s CEO Elon Musk will be appointed to a role in his administration, heading up the proposed Department of Government Efficiency alongside former Republican presidential candidate Vivek Ramaswamy.

Musk now has “a ring-side seat and has Trump’s ear” which could lead to benefits for Tesla and his other companies. No surprise, then, that Tesla’s share price gained 14.8% on election day; while more AJ Bell customers sold than bought, the market clearly views the outcome as positive for Tesla.

Trump’s bitcoin bounce

Other notable inclusions in the top ten traded stocks on election day are Coinbase (NASDAQ: COIN), MARA Holdings (NASDAQ: MARA) and MicroStrategy (NASDAQ: MSTR).

For investors not familiar with these, all are closely associated with bitcoin – an asset class that Trump was keen to promote his affinity for during the election campaign.

Coinbase is one of the world’s largest cryptocurrency exchanges, while MARA is one of the largest bitcoin miners.

BI software house MicroStrategy was co-founded by Michael Saylor, a prominent bitcoin advocate. In 2020, Saylor began adding bitcoin to MicroStrategy’s balance sheet as a hedge against inflation; now, MicroStrategy is the largest corporate holder of bitcoins.

Consequently, its share price is now correlated with bitcoin’s price moves (though, because it leverages its purchases using debt, MicroStrategy’s moves are often even more extreme than bitcoin’s).

During the campaign, Trump promised to make America ‘the crypto capital of the planet’ and to build a strategic reserve of bitcoin. Bitcoin gained over 9% on 6 November and is today trading at all-time highs of over $90,000.

MicroStrategy gained 12.9% on 6 November and added nearly 40% more since then.

Mixed picture for Nvidia

Nvidia (NASDAQ: NVDA), uncharacteristically, saw one of the more reserved price movements among the most-traded stocks on election day, gaining a comparatively modest 4.1%.

While a Trump presidency is expected to be good news for the tech and AI sector that Nvidia serves, the geopolitical implications of his return to the Oval Office complicate matters.

The risk to the investment case in Nvidia “has grown exponentially after Trump was re-elected”, says Coatsworth. Nvidia is dependent on Taiwan Semiconductor Manufacturing Company (NYSE: TSM) for its chip components, but China has threatened to invade Taiwan on multiple occasions.

Trump, meanwhile, has previously spooked semiconductor stocks by indicating that he would make Taiwan pay for US protection. If Taiwan refuses to do so, Nvidia’s supply chain could come under threat.

Did Trump’s win surprise investors?

Data on the number of shares sold indicates that investors may have been caught off guard by the outcome.

6 November saw two-thirds as many sell trades as buys for US-listed stocks across AJ Bell’s website and app.

“That suggests investors were either spooked by the election result or they felt they had made the wrong trade ahead of the event,” says Coatsworth.

However, while investors using AJ Bell’s platform may have misjudged the result, the gains made by the S&P 500 as a whole suggest that the stock market has welcomed the result.

Donald Trump won the US presidential election, gaining 295 electoral votes to Kamala Harris’s 226. It also looks possible that the Republicans could win the “trifecta”: the presidency, Senate and the House of Representatives (which remains one to watch out for).

Trump is on track to win the popular vote too, the first time a Republican has won majority support since George W. Bush in 2004. In his victory speech, Trump celebrated his “magnificent victory” and promised a “golden age” for America. The dollar, US bond yields and stock futures jumped. So-called “Trump trades”, such as US bank stocks, electric car maker Tesla and bitcoin, also rose. Centrists who had predicted an easy win for Harris were not so perky.

How did Trump win the US presidential election?

Why did American voters do it? says Edward Luce in the Financial Times. “A large part of the story” is simply that a sufficient number of them “want what Trump is selling” – a stricter line on immigration, an end to globalisation, inflation and war, and to give “a middle finger” to the liberal elite’s “often self-parodying approach to identity, better known as wokeness”. To get that, they were prepared to overlook his flaws and the risk of giving him power.

The risk looks considerable. Trump made many worrying promises on the campaign trail, says The Times. He pledged mass deportation of illegal immigrants, thought to number in excess of 11 million; to end US involvement in the war in Ukraine; to hike tariffs to 10% on all imports and to 60% on everything from China; to have a say in the policy of the Federal Reserve; to introduce an oil policy, which he summed up as “drill, baby, drill”; to “fundamentally reevaluate” the purpose of Nato and get Taiwan to pay the US for defending it; and much more. The economic effects of the tariffs alone are “literally incalculable”. But as ever with Trump, it is hard to know what to take literally. The threats are at least in part negotiating tactics to win concessions from other countries.

What does it mean for the US economy?

Whatever he does, the US economy is “in for a wild ride”, says Mark Niquette on Bloomberg. Most economists predict higher inflation and slower growth as a result of his measures. But Trump boosters say the negative projections don’t account for the economic growth that his deregulatory agenda and plans to boost energy production will bring, not to mention his promise to make permanent the tax cuts he pushed through in 2017.

There will be winners and losers. Europe, a likely victim of the tariffs, is one loser – the euro fell on news of Trump’s win. The UK, too, should be worried. “We now face the prospect of an even more competitive US economy sucking in money from the rest of the world,” says John Stepek, also on Bloomberg. “That’s going to throw our own uninspiring growth into sharp relief at a time when there seems to be little interest in improving things.” “A new story is unfolding,” says Tom McTague on Unherd. “We are back in Trump’s world and we don’t yet know what he is going to do with it.”

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Trump’s comeback comes as no surprise and is one of the greatest political comebacks in history.

The last time a former president returned to the White House after an electoral loss was more than 130 years ago when Grover Cleveland claimed victory in 1892.

But while Trump’s win was widely expected, what does his win mean for your money, how have the markets reacted and does Trump’s win present an opportunity for investors? Which sectors will do well?

US election: FTSE jumps

As the markets woke up to the news that the Republican Donald Trump was set to become the 47th US president, the FTSE climbed 1.3% - the biggest percentage gain in three months. The FTSE 250 mid-cap also jumped by 1.4%.

But this was not the only rally - global stock markets rocketed. The S&P 500 climbed and the Russell 2000 also jumped.

Even Bitcoin surged past $75,000. Gold too went up, having already reached record highs.

US stocks opened at record high, and some, like Tesla, soared 12% upon the news and shares in Goldman Sachs jumped 10%.

The markets on the whole have not panicked, and despite the renewed threat of high inflation, investors were not worried.

But, there are always winners and losers - here are the sectors that could do well out of the Trump victory.

Which sectors will do well following Trump’s win?

According to experts, some sectors are poised to do better than others under Trumps’ presidency.

Financials

The sector is expected to do well if the regulatory environment improves. Citigroup and JPM have been tipped by IG Group as the winning stocks.

“The Biden administration wanted the largest banks in the US to hold more capital in reserve, to cushion them against potential losses in the event of any setbacks. Those extra capital requirements may not be required under Trump, effectively meaning banks would have fewer constraints and be able to use more cash for lending or share buybacks,” Dan Coatsworth, investment analyst at AJ Bell says.

“When you factor in the potential for looser regulations, lower corporate taxes potentially leading to higher business investment, and the prospect of interest rates staying higher for longer which is good for lenders, it’s easy to see why the outlook for the banking sector is more encouraging under Trump.

Crypto

We’ve already seen the Bitcoin surge and with Trump’s vision to make the US the digital asset centre of the world, stocks like Coinbase and Paypal could do particularly well.

Oil stocks

In the words of Trump - “Drill, baby, drill’! We can expect to see a higher demand for oil stocks. Trump has spoken about increased drilling on federal land and awarding more permits for LNG exports.

Exxon Mobil Corp, ConocoPhillips, Peabody Energy Corp and Nucor Corp are expected to be the winning stocks, experts suggest.

Defense

Republicans have traditionally been good for defense stocks, with stocks such as Boeing Co and Lockheed Martin Corp tipped to be the ones to watch.

Technology

Will Trump help fuel M&A activity and loosen regulatory pressures? If so, this could mean more power for some of the biggest technology firms.

Amazon, Google and Microsoft are tipped as winners with Trump in power.

Which sectors are the losers?

Someone has to lose and according to experts, chipmakers and healthcare insurers may not be on a winning streak under Trump’s Power.

Nvidia’s record run could come to an end if the tariffs Trump is discussing are enacted, creating a negative relationship with China which could impact supplies.

As for healthcare insurers, if Trump appeals ‘Obamacare’, healthcare supplies could also be hit. UnitedHealth Group and HCA Healthcare Inc may not do well.

There was no shortage of inflammatory commentary during Donald Trump’s rally at New York’s Madison Square Garden on 27 October. But the owner of the venue was studiedly apolitical. “As a business, we are neutral in political matters. We rent to either side,” said an MSG representative. The stance reflects that of its boss, James Dolan, who runs much of the media, sports and entertainment empire started by his 98-year-old father Charles – the founder of pay TV channels Cablevision and HBO (both now sold). Assets these days include the New York Knicks and Rangers sports teams and the $2.3 billion Sphere arena in Las Vegas.

Dolan junior, 69, is a registered Democrat, notes The Hollywood Reporter. But he’s also a close friend of Trump’s of 30 years’ standing, who got married at his Mar-a-Lago resort in Florida. Described by New York magazine in 2005 as “excitable, prone to outbursts and tantrums” but “smart enough to know that doesn’t play well in the media”, Dolan has spent a lifetime working in his father’s shadow. Throughout much of his tenure as CEO of Cablevision, which began in 1995, there was speculation about who was really running the show. The two came to blows 20 years ago when they fell out over Charles Dolan’s cherished cash-haemorrhaging Voom satellite venture. Ultimately the son prevailed and Voom was shut down.

One of six children born to Charles and his wife Helen, Dolan grew up in considerable material comfort on Long Island. “He was a combustible kid who loved rock music and did everything he could to be around it, even if it meant working as a roadie in a garage band.” After drifting through two colleges, he eventually landed at SUNY-New Paltz, majoring in communications while taking guitar lessons on the side. A few days after graduation, he went to work for the family firm.

“It was a ground-floor-up education”, involving peddling cable subs and selling advertising time. At one point he was despatched to Cleveland to launch an all-sports radio station. Nonetheless, the cracks were showing. Throughout his early adult life, Dolan battled drug and alcohol problems, later describing his mid-30s as “a festival of self-abuse”. He cleaned himself up and has been sober ever since.

By many accounts, Dolan’s short temper and inherent sense of entitlement have proved more difficult to manage. “At practically every step, he has been feuding with somebody,” says New York. His privileged background and bombastic style continue to “irk his detractors”, says the Financial Times. Sometimes with good reason. Dolan sparked an outcry in 2023 over his “dystopian” use of face-recognition software at Madison Square Garden – an effort “to stop lawyers working on litigation against his company from entering”.

What's next for James Dolan?

After a lifetime of being defined as his father’s son, Dolan is “finally getting credit as a visionary” for building the Sphere – a huge orb-shaped arena in Las Vegas “composed of a video-screen shell”, says the FT. But while undeniably a feat of “architectural artistry”, he is struggling “to square the circle on its finances”. Plans for global expansion, which include a deal to licence its IP to developers in Abu Dhabi, suffered a setback in 2023 when London mayor Sadiq Khan “put the kybosh” on a proposal to build a similar arena in Stratford on grounds that the flashing of 1.2 million exterior LED screens would be “disruptive” to residents. Whatever happens next, Dolan will always have the consolation of music and singing with his band, JD & the Straight Shot. Worth around $2 billion, he was described by the Deadspin blog site as “the richest touring musician in the world”. Dolan’s “musical talents”, however, concluded The New York Times after one performance, “are unlikely to endanger the day job”.

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US election outlook
America’s seven battleground states are all polling within a percentage point or two, ahead of the presidential election says pollster Nate Silver in The New York Times. Odds of 50-50 for Donald Trump versus Kamala Harris “is the only responsible forecast”. But if pushed, “my gut says Donald Trump”.

Traders have the same intuition. On top US betting markets, Trump has more than 60% odds of winning next week, with Harris below 40%. In financial markets, the “Trump trade” is back, says the Dealbook column in the same paper. Oil firms and cryptocurrencies – which should do well under the Republican – are rallying.

Though Trump wants a weaker dollar, the greenback is rising as markets move to price in the inflationary impact of his tariff plans. Bitcoin is the “quintessential Trump trade”, says Richard Abbey on Bloomberg. Trump’s promises to support deregulation have made him “the darling” of the crypto industry. Bitcoin has leapt more than a third since early September, tracking Trump’s rising chances of winning.

For financial markets, the biggest impact could come from higher bond yields (bond yields move inversely to prices). Investors have been selling off US government debt on expectations that a Trump administration will let inflation rip. Yields on the benchmark US ten-year Treasury have risen from 3.6% in September to 4.2% now, a “massive move” in bond-market terms, says Ben Levisohn in Barron’s. The story goes that Trump will be more spendthrift than Harris, necessitating higher borrowing costs for the US Treasury.

Investing with your politics is a bad way to lose money...

Still, reading the tea leaves is rarely straightforward. The bond spike could have just as much to do with strong US growth and bets on slower rate cuts ahead. History shows that “investing with your politics is one of the worst ways to lose money”. US equities tend to rise “regardless of which party controls the White House”. Forces beyond domestic politics ultimately matter more for investors, agrees Jim Reid of Deutsche Bank. Energy shares, for example, did far better under Joe Biden than they did under pro-fossil-fuel Trump.

Regulation matters, but world events are more decisive. There is now an “overwhelming consensus” among hedge funds that Trump is heading for victory, says Katie Martin in the Financial Times. That could be a misreading of polls that still show a virtual “coin toss”. Some “big egos” on Wall Street will look very silly if Harris prevails. Indeed, “market pricing is a lot more cautious”, says George Saravelos of Deutsche Bank. For now, the US stocks most sensitive to Trump’s tariff plans are “moving sideways”, rather than selling off.

Similarly, the euro, which could approach parity with the dollar in a full-blown trade war, is still at $1.08. “Hesitant to make big wagers that could jeopardise this year’s strong gains”, some asset managers are cutting market exposure before the vote, says Caitlin McCabe in The Wall Street Journal. This year has served up market-negative election surprises in Mexico, India and France, says Zachary Kurz of PinnBrook Capital. Why should the US be any different?

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The US election is nearly upon us and the contest between current vice president Kamala Harris and former president Donald Trump is heating up. Election outcomes “tend to have limited long-term impact on the broader economic cycle or overarching market trends”, as Gabriella Macari of Arbuthnot Latham points out, but the result can “heavily influence specific sectors, depending on the victor and their policy stances”. Here we take a look at how the sectors of the US economy will – or won’t – be affected by the election result.

Who will win the 2024 US elections: Trump or Harris?

What is the result likely to be? Picking the winner is difficult because the outcome is not based solely on who wins the national popular vote, but rather on who wins the Electoral College, with votes in the Electoral College based on the results of each state. This system tends to penalise the Democrats, who “waste votes by running up the score in a few states, but come up short in many others”, says expert Charlie Cook, who has been covering US elections since 1984. Another complicating factor is that, although the polls accurately reflected the final vote at the national level in both 2016 and 2020, they were thrown off in a couple of key states by largely Republican-leaning “low-trust” voters who are “generally unwilling to respond to surveys”. Pollsters have tried to correct for these biases, but to the extent that there is now a risk they have “oversampled Trump-like voters”, says Cook.

It “looks more likely than not that Harris will win the national popular vote”, but winning the electoral college, which is what really matters, “is at best a coin flip”. Cook isn’t alone in thinking the election could go either way. The betting markets and statistical mastermind Nate Silver has tended to make Harris a slight favourite, or put the contest at 50/50. There’s also the nightmare scenario of Trump losing the election, but still contesting it, says Paul Jackson of Invesco – this wouldn’t be a surprise considering that Trump would benefit from winning, given his legal woes and that his supporters have lost faith in the system, which means “we could end up with a volatile situation”.

Kamala Harris: good for houses and renewable energy

But with Harris being the slight favourite, it makes sense to start by looking at what sectors would benefit if she wins. One victor would be the house-building industry, says Julian Wheeler of Shard Capital. She has pledged to give every first-time buyer a $25,000 grant towards a deposit for a house, and she has plans for tax changes that would create incentives to build more “starter homes”. The first policy could help boost the margins of housebuilding companies by pushing up prices; the second could genuinely boost supply and hence demand. Taken together, they should increase profitability in the industry, which would help firms at all levels of the supply chain, from those who make building supplies and appliances right down to those mining and quarrying firms who extract the aggregates. The recent uptick in housing permits “may be a sign that the industry is already starting to prepare for the pro-building policies that will follow a Harris victory”.

It also seems clear that Harris will continue the pro-renewable-energy policies of the current administration. In 2022, Joe Biden’s administration passed the Inflation Reduction Act, a “significant chunk” of which was dedicated to wind and solar energy projects, says Richard Wilson of Polar Capital. Such projects are likely to have their funding pulled if Trump wins, which would almost certainly mean they “fall by the wayside”, but they should continue to prosper under Harris.

Overall, Harris, like most Democrats, favours creating incentives to invest in climate change, agrees Ryan McNelley of financial and risk advisory firm Kroll. Harris is therefore “likely to come up with further tax incentives, both for those running renewable energy plants, and those investing in and building them”. Given that “no small part” of the financial sector’s sudden interest in renewable energy over the past few years is down to the introduction of government support, it’s pretty easy to see that this sector will be the big winner from a Harris administration.

Donald Trump: good for fossil fuels, financial stocks and crypto

A victory for Trump, on the other hand, would be much better for those involved in fossil fuels. The sector will benefit in two main ways, says Raheel Siddiqui of investment management firm Neuberger Berman. Trump is highly unlikely to continue Biden’s efforts to take a lead on reducing carbon emissions and clamping down on pollution. Indeed, Trump’s entire energy strategy is based on a deregulatory programme that aims to increase the production of fuels such as oil, gas and even coal, says Siddiqui. Trump has also signalled that he will end Biden’s freeze on approving terminals for the export of liquefied natural gas.

Financial stocks will also be clear winners from a Trump victory, says Wilson. They “did very well under Trump’s previous administration” as there “was a clear move to roll back red tape”, which should continue if he wins a second term. Trump may also extend the generous tax cuts for the sector, such as those he made to real estate investment trusts in 2017, which are currently due to expire next year. This is important, because if the cuts aren’t renewed many Reits will be left with a large tax bill, leaving investors “with blood in their portfolio”.

When it comes to financial services, Trump will be more “business-friendly”, agrees Susan Light, a partner at law firm Katten Muchin Rosenman. He is likely to repeal many of the rules passed over the last four years, and follow the blueprint of the Heritage Foundation, a conservative think tank that has devised “Project 2025”, which aims to “rein in financial service regulators”. (Harris, on the other hand, is likely to keep appointing regulators, such as the current SEC chairman Gary Gensler, who has “led one of the most aggressive rule-making agendas in decades”.)

Finally, Trump is also “likely to be the opposite of Harris when it comes to technology regulation”, says Wilson. Trump would carry out a “broad easing” of the regulatory environment, especially when it comes to financial technology and cryptocurrency – good for the shares of companies in those areas. (By contrast, the regulatory crackdown under Harris “would be even harsher than it currently is under Biden” – she is likely to continue the flurry of antitrust actions that has seen the Department of Justice launch multiple crackdowns against Google’s owner Alphabet, for example.)

Kamala Harris good for bonds, Donald Trump for shares

The election outcome will not only affect individual sectors, but may also have an impact on the wider economic environment. Indeed, Harris and Trump are “complete 180-degree opposites” when it comes to fiscal policy, says Wheeler. Harris has pledged to raise the corporate tax rate from 21% to 28%, for example, while Trump wants to cut it to 15%. In the short run, this difference “is roughly equivalent to 5% of the earnings of the S&P 500” – a Trump win would therefore provide a particularly big boost “for the shares of companies that earn most of their money in the US”.

Any boost to the wider economy provided by Trump’s tax cuts could, however, be outweighed by the fact that they would also expand the federal deficit, says Wheeler. Combined with Trump’s determination to hike tariffs on imports to the US, this would push up prices. This in turn could force the US central bank, the Federal Reserve, to call a halt to rate-cutting and raise interest rates – which would be bad for the market in US government bonds. There is even a good chance, Wheeler adds, that if Trump cuts taxes “while continuing to spend like a drunken sailor” there could be a US version of the mini-meltdown in bonds that accompanied Liz Truss’s brief time in office in Britain.

Wilson is also unimpressed by Trump’s tariff plans. His idea of imposing a 10% minimum charge on all imports into the US is especially “unworkable”, he says, and could lead to “strategically important American industries facing shortages of key raw materials”. Indeed, Trump’s plans are so extreme that he will be forced to tone them down – “you could end up hearing a lot more rhetoric” than seeing actual action, “certainly in the first year” of a Trump term. Yet, even so, firms that import goods from China will surely suffer under a Trump administration, and this will ultimately be bad for the dollar. Alex Crooke, fund manager of The Bankers Investment Trust also points out that “imposing tariffs tends to be zero sum game, with prices rising to offset the charges and other countries imposing their own tariffs”.

Sectors that will do well under either

Despite the differences in policy, there are some sectors that should do well regardless of who wins in November. Technologies that capture the carbon emissions from the least polluting fossil fuels, such as natural gas, will do well whoever wins power, says Richard Lum of VH Global Sustainable Energy Opportunities. Such technologies will help the US reach its goal of getting to net-zero carbon emissions by 2050, while still producing enough cheap power “to keep up with the explosion in demand from data centres”.

The same applies to nuclear power, says Siddiqui. That is one of the few non-fossil energy sources Trump seems to like, and he is planning to cut regulations on the sector. Indeed, successful efforts from both Democrats and Republicans to get nuclear power included in the industries to get subsidies under the Inflation Reduction Act show that it is one of the few industries to enjoy “clear bipartisan support” in an otherwise divided Congress, says Jags Walia of wealth manager Van Lanschot Kempen.

The pharmaceutical industry should also do well whoever gets into the White House. There has been plenty of “election-year rhetoric” about cutting drug prices, as Geoffrey Hsu of the Biotechnology Growth Trust points out, but further action is unlikely, especially if Congress ends up split between the Democrats and Republicans, as most people expect will happen (the Republicans are strong favourites to win the Senate). Even if the Democrats manage to pull off a clean sweep, further radical change is unlikely given that a bill has already been passed allowing Medicare to negotiate prices with drug companies on a range of drugs.

The overall regulatory environment is also “very constructive” for the approval of new drugs, and regulators are “increasingly willing” to give the green light to drugs that deal with unmet needs, even if they have a “less than perfect” dataset. So Hsu is very bullish on the industry. Neither presidential candidate is likely to stop large drug companies from buying smaller companies in order to refill their drug pipelines, either. The industry looks attractive, especially given that it is still trading at “unprecedentedly low valuations”.

How the US election will impact the markets

Just because a president has a friendly (or unfriendly) stance toward a particular industry doesn’t automatically mean that stock performance will follow suit, of course, says Frédérique Carrier of RBC Wealth Management. The US political system is “extremely decentralised”, as Anthony Kingsley of Findlay Park Partners points out, with power split between the White House, Senate and the House of Representatives, and state governments also playing a big role. And presidential policies often end up playing second fiddle to wider market trends. The classic case is that of shares in energy companies – they “did badly under climate-sceptic Trump, but have done well under Biden, despite his green leanings”.

Overall, whoever wins the White House, America will still retain some “incredible competitive advantages”, such as a “liquid capital market, the ability to generate new companies, a strong constitution and abundant energy”, says Kingsley. It will remain an “incredible landscape for investors” and the wider market will navigate any “short-term turbulence” caused by the person at the top.

How to invest around the US election

One investment trust that should do well from either Kamala Harris’s efforts to reduce carbon emissions or Donald Trump’s desire for cheaper energy is VH Global Sustainable Energy Opportunities Plc (LSE: GSEO). This investment trust is exposed to a range of sustainable energy infrastructure and projects – from hydro projects to battery storage and carbon capture – mostly in countries that are members of the EU and OECD club of developed nations. The company trades at a discount of around a third to net assets, has a dividend of around 7.5%, and an annual ongoing charge of 1.5%.

Another energy technology that falls into the “sweet spot” between renewables and fossil fuels is nuclear power. One way to benefit from a resurgence in the industry under either Harris or Trump is to buy shares in those companies mining uranium. The Sprott Uranium Miners ACC (LSE: URNM) exchange-traded fund invests in 38 key uranium miners on the North Shore Sprott Uranium Miners index, which has risen 58% over the past three years. Its largest holding is the Canadian firm Cameco Corp. The ETF has a total expense ratio of 0.8%, which is reasonable for such a specialised fund, and a dividend yield of 0.81%.

Unless the Democrats win both branches of Congress as well as the White House, the biotechnology sector should be relatively insulated from the political fallout of the election – and is so underpriced that even a clean sweep may not be too damaging. One investment trust worth considering is the Biotechnology Growth Trust (LSE: BIOG), run by Geoffrey Hsu and Josh Golomb. It consists of 68 holdings, the largest of which is Amgen. The ongoing charge is 1.2%.

If you think Harris will do well, you might want to consider Builders FirstSource, Inc (NYSE: BLDR), a supplier and manufacturer of building materials and manufactured components to house builders, sub-contractors and consumers. It has already doubled its sales between 2019 and 2023, and still trades at only 16.5 times 2025 earnings. Sven Anders of JPMorgan Asset Management likes Willscot Holdings Corp (Nasdaq: WSC), which specialises in portable offices, used primarily on construction sites. Revenue has tripled between 2018 and 2023, but the stock trades at only 17 times 2025 earnings.

One way to sidestep the worsening Sino-US relations that could occur under Trump is by investing in one of the countries in Southeast Asia, such as Malaysia, that are “increasingly becoming manufacturing hubs for global companies seeking to diversify away from China”, says Nigel Green of deVere Group. The Xtrackers MSCI Malaysia UCITS ETF (LSE: XCS3) tracks the MSCI Malaysia index, with an expense ratio of 0.5%.

Finally, one American fund with a long-term pedigree to get you through any short-term post-election turbulence is Findlay Park American Fund. It is run by Anthony Kingsley, Jon Tredgett and Paul Gannon, and aims to invest in companies that can deliver long-term growth, including many small and medium caps. It has an 83% activity ratio and, since it was established in 1998, has returned an annual average of 12.3% a year, far more than the S&P 500 or Russell 1000. It has ongoing charges of 0.84%.

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“As if there hadn’t been enough drama in America, Donald Trump has survived another assassination attempt,” says Freddy Gray in The Spectator. The attempted killing of the former president at his golf course “was not nearly as threatening or deadly as the shooting nine weeks ago in Butler, Pennsylvania”, but it could still prove to be a “major moment” in the presidential campaign. It will remind voters of his “narrow escape” in Pennsylvania and of the fact that there are people who still want him dead, which might boost support among his backers and the undecided.

Trump won sympathy for his “conciliatory” tone after the shooting in July, says Rozina Sabur in The Telegraph. But this time he has said that Kamala Harris and Joe Biden’s rhetoric are to blame for creating an atmosphere of hatred and distrust. This is ironic coming from Trump, who is known for his ad hominem attacks on his opponents, but it’s also a “strategic error”. His claim may resonate with his ardent supporters, but it risks alienating the moderate swing voters who Trump must reach if he is to prevail in November. 

What are the chances of a post-election war?

Let’s just be thankful he escaped unharmed, says Simon Tisdall in The Guardian. If Trump had been killed or suffered serious injury, that would not only be a personal tragedy for him and his family but would also throw the November presidential election into “utter confusion” and probably lead to “violent disorder”. The fringes of American society are now “sick with gun violence, schism and hate” and there are “real, justified fears” for the safety of Trump and J.D. Vance, as well as for Harris, Biden and Tim Walz.

The “obvious but chilling possibility” that a candidate in the US presidential election could be seriously harmed or even killed isn’t the only concerning aspect of this election, says Daniel Finkelstein in The Times. 

A few past elections, most notably in 1960 and 2000, have ended up with the losing candidate coming close enough to consider contesting the result. In the 2000 election, Al Gore eventually accepted the decision of the Supreme Court to stop the recount and honourably conceded. Richard Nixon did the same in 1960. But can anyone imagine that happening after this election? A result as close as that of 2000 is possible, but it’s hard to see either Trump or the Democrats gracefully accepting a loss. 

How ugly could it get? The signs are not good, says The Economist. Even without Trump on the ballot paper, US elections are “drawn out and complex”, and “tend to invite legal challenges”. They “demand patience and trust”. Yet those qualities are in ever shorter supply in today’s America, a situation not helped by Trump’s claim that the last election was stolen from him. 

Polls suggest the result will be tight, and Trump and his party are “gearing up to wage the post-election war a second time”. Worryingly, about 20% of American adults say they are open to the possibility of using violence for political ends. America will still see a peaceful transfer of power in 2025. But that is “a minimal definition of democratic success”. Voters need to believe that the process is fair and can be trusted, and accept the result.

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Highly successful activist hedge-fund bosses like Bill Ackman share one universal trait, says Felix Salmon for Axios. They all believe they know “how best to run a public company”. But when they try to do so themselves, it doesn’t always work out. 

British investors will be most familiar with Wall Street billionaire Bill Ackman through Pershing Square Holdings, his London- and Amsterdam-listed investment vehicle. While returns have been good, for most of the past decade the fund has been trading well below its net asset value, a fact that recently helped sink Ackman’s grand plans for a $25 billion New York listing of Pershing Square USA. 

Undeterred, he is pushing to construct a deal that will bring investors on board. A public listing is “a somewhat odd choice for a hedge fund,” says Allison Morrow for CNN. Hedge funds usually prefer to stay “in the shadows” to avoid the intense “glare of US securities regulators”.

Bill Ackman's turn to the right

But Ackman is no stranger to fame. The listing plans are designed to cash in on his newfound clout on social media. Long experienced in launching stinging attacks on corporate leaders, he has recently turned his hand to politics. On social media site X (formerly Twitter) he has amassed 1.4 million followers. 

Ackman first gained widespread notice beyond the world of finance last year when he used X to campaign against anti-Semitism on US college campuses, backing a push that ultimately forced Harvard’s president to step down. Though a registered Democrat, his online persona has taken a notably right-wing turn. He is supporting Donald Trump and has penned long critiques of US affirmative-action practices. 

He has taken some stick for that, but criticism won’t faze him, says Reeves Wiedeman in New York Magazine. Shareholder activists are used to having a “fervent commitment” to their positions. Hedge funders are said to be “often wrong”, but “never in doubt”. Ackman, 58, has been both spectacularly right and crushingly wrong during his long career on Wall Street. In 1992, aged 26 and fresh out of Harvard Business School, he co-founded his first hedge fund with backing from a small group of investors, including his father, a well-to-do New York real estate broker.

In 2013 he waged an “infamous activist battle” against Herbalife, a dietary supplements business that he labelled a “pyramid scheme”. Later regulatory investigations partly “vindicated” his stance, but they came too late for him to make any money. Pershing Square has since sworn off “bombastic” campaigns in favour of taking stakes in “boring” blue chips like Starbucks and Hilton. Today the model is less a pugnacious corporate raider and more Warren Buffett.

Ackman's love-in with Twitter

Ackman joined Twitter in 2017 when he was reeling from the end of his marriage of more than two decades and “some of the most disastrous investments of his career” – he closed out the Herbalife position in 2018 at a roughly $1 billion loss, says Maureen Farrell in The New York Times. He has since re-married. Yet arguably it is his “relationship” with Twitter that really marked a new chapter in his life. Ackman credits social media with allowing him to “see around corners” during the pandemic. 

In February 2020 he was early to see the writing on the wall as Covid spread, betting $27 million against the market and turning it into $2.7 billion in a matter of weeks. In the US, Ackman’s fame is such that Facebook is now “full of impersonators” pretending to be him and offering stock tips. 

Having discovered a taste for political activism, is a move into elected office the next step? “I have no plans to run for president,” he says, “but I do like having an independent voice and having influence.”

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Kamala Harris, currently serving as the 49th Vice President of the United States under the Biden administration, is now formally the Democratic Presidential nominee. Harris’ extensive career includes roles as the District Attorney of San Francisco, Attorney General of California, and a United States Senator. 

Known for her online presence, she has been referred to as “Brat” and a “Feminominom,” social media “in-jokes” that indicate her widespread appeal with groups as far apart as Gen Z TikTok influencers and Nancy Pelosi, the octogenarian former speaker of the House of Representatives. After the presidential debate between Harris and Donald Trump on 10 September, pop megastar Taylor Swift waded into the conversation, revealing that she would be voting for Harris in the upcoming election. Swift called Harris a "gifted leader" before signing her post off as a "Childless Cat Lady" — a dig at comments made by Donald Trump’s running mate JD Vance, which were widely criticised as sexist. 

Electing a female president would be a landmark event in US history. US women have had the right to vote since 1920, but have only participated in 104 of the 236 years of presidential elections. We’ve seen female leaders in countries as far and wide as Italy, New Zealand, India and of course, the UK, but the US has never had a female President. Hilary Clinton came closest in 2016, winning the popular vote but not the crucial electoral college. 

The historical significance of electing the first female president would profoundly impact the US and its history, inspiring future generations and potentially shifting societal norms. The pay gap and the pension gap between genders are frequently discussed, but the "dream gap" — where young girls lose interest in leadership roles as early as age six due to a lack of representation — is equally damaging both to equality and to overall company/country performance. Research by McKinsey shows that diversity in leadership (of all kinds) drives better performance. They state “the business case for diversity, equity, and inclusion (DEI) not only holds, but grows even stronger”.

What type of stock market will the next president inherit?

The stock market's performance is influenced by various factors, including policy stances and fiscal impacts, but the stock market is not the economy. 

Earnings growth, often driven by an expanding economy, is a significant factor for market rallies. Currently, AI and technology stocks dominate the narrative, with the S&P 500 up 14.54% year-to-date, and the technology sector, which constitutes 31.34% of the S&P 500, up 23.03%.

Economic policies operate with long and variable lags, meaning their full impact may not be immediately visible. Therefore, the incoming President will need to navigate a complex landscape where policy decisions and market dynamics interplay in shaping the stock market's future trajectory.

Sector performance overview

The following data provides a snapshot of year-to-date (YTD) performance and market weight of various sectors as of market close 30 July 30, 2024:

Regardless of who takes office, the new President will inherit an economy with a cost-of-living crisis. The Federal Reserve (Fed) is likely to cut rates due to deflationary trends in the Personal Consumption Expenditures (PCE) – currently at 2.6% slightly above the Fed’s 2% target (data as of 07/31/2024). Inflation is cooling due to monetary policy and supply chain normalisation. The Fed has acted with a cushion due to above-trend GDP growth, partly supported by fiscal stimulus incentivising U.S. manufacturing. On July 31st, the Federal Open Market Committee (FOMC) left rates unchanged, indicating a shift in focus from inflation cooling to normalising unemployment. If the Fed acts too late, the new President could inherit a very challenging economy and even a recession.

Legislative considerations

Senate and House elections are crucial since Presidents do not have unilateral control. The next Congress will face a full agenda starting January 3rd. It will likely need to address the debt ceiling, which suspends on January 1st, and determine the fate of personal tax cuts from the 2017 Tax Cuts and Jobs Act, set to expire at the end of 2025. While the election brings uncertainty over certain fiscal policies, the outlook for the deficit remains a pressing concern.

Will Kamala Harris be good news for the market?

Artificial intelligence stocks: regulatory impact

AI stocks have been the primary source of earnings growth and market rallies. Kamala Harris has shown a regulatory stance on AI. On October 30, 2023, the Biden-Harris administration signed an executive order directing the Department of Homeland Security (DHS) to lead the responsible development of artificial intelligence. Unlike the European Union, the U.S. lacks comprehensive AI regulations, requiring Congressional action. The market has already reflected this regulatory executive order. However, there is uncertainty, as seen in the recent CrowdStrike process failure impacting banks, hospitals, and airlines. Additional regulation may have a short-term impact on AI-exposed stocks. 

Trade policy: potentially deflationary stance

The 10% tariffs imposed by the Trump administration have been costly for taxpayers. Additional tariffs could trigger a trade war or recession. The Biden-Harris administration has favoured targeted tariffs, including tripling the existing 301 tariff rate on Chinese steel and aluminium. Although this initially hurt the semiconductor industry, it has since recovered. These tariffs encourage domestic manufacturing.

EV adoption and clean energy: sector boost

Harris supported the Green New Deal during her 2019 presidential bid, advocating for banning fracking and offshore drilling. The administration initially set ambitious EV adoption targets but reduced them from 67% by 2032 to about half after pushback from the auto industry and labour leaders. Expansion or additional fiscal policy on these stances could reignite the clean energy sector. 

Aging population: healthcare cost implications

The Inflation Reduction Act (IRA) included provisions for pharmaceutical negotiations, allowing for reduced out-of-pocket costs and payments to Big Pharma. Implementing additional Medicare drug cost negotiations is deflationary and essential for an ageing population. This might negatively impact big pharma securities, but the overall positive economic impact from increased income could outweigh this. Additionally, private healthcare already negotiates prices.

Tax policy: potential reversal of Trump's cuts

The Tax Cuts and Jobs Act slashed corporate tax rates from 35% to 21%. Harris is likely to reverse some of Trump's tax cuts, though the extent is unclear.

Immigration policy: supporting unemployment data

Federal Reserve Chair Jerome Powell has noted that robust unemployment figures are supported by increased labour market participation and immigration. Harris backed an immigration bipartisan bill impacting labour market data positively. Reversing this could push the U.S. into a recession as an ageing population leaves the workforce.

Affordable housing: inflation control measures

Shelter inflation is cooling but remains elevated. Earlier this month, President Biden called on Congress to pass legislation giving corporate landlords a choice between capping rent increases at 5% or losing valuable federal tax breaks. As a senator, Harris proposed legislation that offered tax credits to households spending more than 30% of their income on rent and utilities, along with a separate bill to allocate over $100 billion towards affordable housing initiatives. While it is unclear if she will pursue similar policies, her past stances suggest possible future impacts.

What could this mean for your investments?

Markets tend to respond more to economic, inflation and earning trends than to election results. Historical data indicates that remaining invested, regardless of the party in power, yields better returns than timing investments based on political leadership.

While the 2024 election will undoubtedly influence the US market, the totality of broader economic factors such as inflation, fiscal policy, and global events will play more significant roles.

Kamala Harris’ ascension to the top of the Democratic Party’s ticket for the US presidential election underlines why the choice of running mate matters, says The Guardian. So her pick for vice-president was always going to get more attention than usual. 

However, her choice of Minnesota’s governor Tim Walz shows the party’s new-found confidence that it is possible to beat Donald Trump. Walz has proved himself “adept” at winning over moderate Republicans in his home state, while the selection of “a folksy Midwestern man who loves hunting” will make it even harder for the Republicans to portray the Democratic ticket as “extremist”.

Did Kamala Harris choose well? 

Not so fast, says The Wall Street Journal. The Harris campaign hopes that Walz’s “plain-spoken personality” and “Midwestern background” will appeal to voters in swing states, including some Trump voters. 

But Walz “has moved Minnesota sharply to the left”. His response to the 2020 riots “will be scrutinised in particular, as poor areas in Minneapolis burned and many business owners lost everything”. Thus Harris’s choice confirms the impression she gave in 2019 “when she ran for the White House as a left-wing Democrat”. That could put off moderate Republicans, who would otherwise have doubts about Trump. Walz’s record as governor of Minnesota means that he “is not without baggage”, says The Economist. And Minnesota isn’t a key swing state: it last voted Republican over 50 years ago. 

Still, unlike Pennsylvania’s governor Josh Shapiro, who was seen as Walz’s main rival for the second spot, Walz’s status as “a leading light of the left of the Democratic Party” will help keep the Democrats united and the base enthused. 

What’s more, Walz has already won plaudits for being an “energetic advocate for Harris on television”, as well as for his “punchy” attacks on the Republican ticket, some of which have been adopted by the Harris campaign.

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Stock market falls, which came just days after Joe Biden claimed he had “cured” America’s economic woes, are a timely reminder that all economic judgements are provisional, and that forecasts – including those relating to presidential legacies – can be wrong. In part, the turbulence was prompted by renewed fears of a US downturn.  

Nevertheless, there is no doubt the US economy is in surprisingly good shape compared with the Covid-wracked one inherited by Biden in January 2021. Adam Tooze, the economic historian, stresses that alone among the big global economies, the US is back to its pre-Covid trend rate of growth, and also back to its growth rate in the 2000s pre-global financial crisis.

The figures under Joe Biden

The US economy grew at an annualised rate of 2.8% in the three months to 30 June, far faster than other developed economies, and US GDP is at an all-time high. Markets were spooked by jobs data showing that in July, US employers added 114,000 roles – fewer than expected – while the unemployment rate ticked up from 4.1% to 4.3%. However, unemployment remains far lower than the 6.4% when Biden took office, and remains close to its lowest level for decades. 

Under Biden, 15 million jobs have been added to the US economy (including 800,000 in domestic manufacturing), in part thanks to specific policies aimed at prioritising the rapid restoration of full employment, and accepting the risk of a tight labour market in terms of inflationary effects. That’s the most jobs ever added during one presidential term. Young workers and lower-paid workers in particular have benefited, seeing much stronger wage growth than higher earners.

What about corporations?

Corporate profits and stock markets have risen strongly, notwithstanding this week’s turbulence. The dollar has performed well against all other major currencies. Inflation, now 3%, is well below its post-pandemic peak, and average hourly wages have risen faster than inflation since Biden came to office. 

It all adds up to an “admirable economic legacy that has underpinned a strong investing environment”, says Abby Joseph Cohen in the Financial Times – and has created the foundations for continued decent growth. But Biden’s critics would say his policies boosted the US deficit; went too far on student-loan forgiveness and anti-trust enforcement; and helped stoke inflation owing to the huge post-Covid fiscal stimulus.

What were Biden’s legislative achievements?

The most significant single piece of legislation, argues Adam Tooze, was the American Rescue Plan Act, passed at the start of Biden’s term in March 2021. This multi-pronged act added up to $1.9 trillion in fiscal stimulus, including direct cash payments of $1,400 for most Americans, higher unemployment benefits, and temporary boosts to child benefits. It was crucial to boosting consumer spending in the wake of the Covid slowdown, and thus protecting jobs and growth. 

Secondly, the Infrastructure Investment and Jobs Act (also widely known as the Bipartisan Infrastructure Law) authorised $1.2trn of long-term federal spending on roads, bridges, water systems and so on. 

Thirdly, the Chips and Science Act provides funding for the US technology sector to reduce dependency on foreign suppliers. And the Inflation Reduction Act (among other things) boosted investment in green energy by authorising $370bn in subsidies, grants and tax credits to US firms in renewables and related sectors.

So what’s the verdict?

The strength of Biden’s economic legacy will obviously depend, to some extent, on whether he’s succeeded by Donald Trump, who has pledged to roll back aspects of “Bidenomics” such as subsidies for green energy and electric vehicles. But there is no doubt that Biden’s presidency has dramatically changed the economic narrative in the US, says Fareed Zakaria in The Washington Post. 

Rather than give tax cuts to the wealthy (like Reagan, George W. Bush and Trump), the Biden administration will be remembered for using the full might and resources of the federal government to make big investments – in infrastructure, childcare, manufacturing and green energy. 

“These investments won’t pay off any time soon; many of them have just begun.” Yet America has embarked on the largest upgrade to its transport infrastructure since the 1950s, with more than 56,000 projects already started, and the bipartisan consensus on investing in domestic manufacturing will remain intact whoever succeeds Biden. That’s a significant legacy.

What else?

The return of industrial strategy, and the use of fiscal stimulus to promote a tight labour market (strengthening the hand of workers and weakening that of business), are at the heart of Bidenomics. His defining legacy, says Shawn Donnan on Bloomberg, will be his “embrace of combative interventions in the international marketplace, driven by a geo-economic rivalry with China”. 

Biden kept Trump’s unprecedented tariffs on Chinese goods, and added to them earlier this year. This is central to another crucial Biden legacy, said Josh Lipsky in an Atlantic Council essay. Under his presidency the “lines between economic policymaking and national security continued to intertwine – and will be impossible to disconnect in the years to come”. 

Biden’s big punt on green energy is not just about being kind to US innovators, it’s about the US national interest and geopolitical competition. In that sense, the Biden years were about “rediscovery of an old idea” – an idea that drove the founding of the World Bank and International Monetary Fund at the end of World War II – that economic security and national security are deeply interconnected. “Whatever policies come next, that lesson won’t be forgotten again any time soon.”

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Donald Trump’s net worth has skyrocketed since he was elected president for the second time during the 2024 US elections.

According to TheStreet, Trump is the richest US president of all time (after previous presidents’ wealth is adjusted for inflation), and the only billionaire to live in the White House.

So, how rich is he? Forbes estimates that Donald Trump’s net worth currently stands at around $7.3 billion.

Though still far from matching the wealth of billionaire Elon Musk, the US president’s fortune cements his status among the richest people in the world.

We take a deeper dive into what Trump owns and how much it's worth.

What makes up the majority of Donald Trump's net worth?

By far, the lion's share of Trump's net worth comes from cryptocurrency and liquid assets, according to Forbes. Trump is flush with cash thanks to his cryptocurrency sales, which have added around $2 billion to his wealth in the past ten months.

Second to stablecoins and memecoins, Trump’s social-media venture has made him billions. Trump Media & Technology Group Corp (NASDAQ: DJT), the parent company of his social network, Truth Social, generated sales of just $3.6 million last year, but due to noise around Trump on a daily basis, shares in his company remain highly priced, leaving him with billions. The media company went public via a merger with the special purpose acquisition company (SPAC) Digital World Acquisition Company in March 2024.

Trump's booming real estate empire

A chunk of Trump's net worth also comes from real estate. Forbes estimates this to be worth $1.2 billion.

This includes his 30% stake in 1290 Avenue of the Americas in New York and 555 California Street in San Francisco, both valued at $1.4 billion and $1.6 billion, respectively.

Among Trump's other properties are Trump Tower ($215 million) in New York, 17 condos in Trump Park Avenue in New York ($94 million), Trump Winery ($44 million) in Virginia, and four homes in Florida, which are worth around $92 million.

He also owns an 11,000-square-foot Trump Tower penthouse in New York, several residential lots in California worth $50 million, and Seven Springs — a $30 million private estate in Bedford, New York.

Trump’s golf clubs and resorts are valued at $1.3 billion. The operating profits at his ten golf courses in six different states boomed from $19 million in 2020 to $66 million in 2024. He also owns three European golf properties – one in Ireland, two in Scotland – both valued at $118 million. The Trump Organization declared losses of over $100 million at these resorts, but business seems to have picked up in recent months, according to Forbes.

He owns several resorts, including the private club Mar-a-Lago in Palm Beach worth $490 million, and the Trump National Doral Miami, worth $390 million.

According to Time, Trump also received £3 million in income from Bibles sold on musician Lee Greenwood’s website. Greenwood is a close ally of Trump. The president also brought in $2.8 million from Trump watches and $2.5 million from Trump sneakers and fragrances.

Other assets held by Trump include $11 million for a helicopter and aeroplane, $5 million in loans made to his children, and a licensing and management business worth $501 million. Trump’s pensions are worth $2 million.

How much have Trump's legal problems cost?

What lies in the debit column, detracting from Trump's net worth? Forbes estimated his legal liabilities at $95 million. This comes after a New York appeals court threw out a $500 million civil fraud penalty case against Trump, bringing down how much he needed to shell out. The judges stated that while Trump was liable for fraud, paying nearly half a billion dollars was excessive and couldn’t be justified.

How Donald Trump's net worth has fluctuated over time

Forbes estimated Donald Trump's net worth to be around $200 million back in 1982, rising to $1.7 billion by 1989. However, his net worth plunged in the 1990s, and he fell off the Forbes 400 list for the first half of the decade.

In 1996, he was worth about $450 million. From there, Trump's net worth gradually rose over time, and by 2007 it was $3 billion before tumbling again in 2009, at the end of the Great Recession (December 2007 to June 2009).

In 2009, Trump began building his billions again, reaching $4.5 billion in 2015. Trump's net worth began to decline again in 2016, falling to $3.7 billion before bottoming out during the pandemic at $2.5 billion in 2020 and 2021, likely in part because of closures that shuttered his clubs and resorts.

In 2022, Trump's net worth was $3.2 billion but dropped again, to $2.6 billion, in 2023. In early 2024, he grew his wealth to over $6 billion after Trump Media went public, per the Bloomberg Billionaires Index.

In 2025, a report by State Democracy Defenders Action estimated that his crypto holdings, namely $TRUMP and $MELANIA meme coins and a stake in World Liberty Financial (a Decentralised finance, or DeFi, tied to his family) were nearly 40% of his net worth – approximately $2.9 billion.

After Trump returned to office, his net worth jumped to $7.3 billion, up from $3.9 billion in 2024.

Bitcoin prices hit a six-week high after Donald Trump threw his weight behind the crypto industry, say Jack Simpson and Dan Milmo in The Guardian. The Republican presidential candidate told delegates at the Bitcoin 2024 conference in Tennessee that he would end the “persecution” of crypto by regulators. He also suggested that instead of selling bitcoin that is seized in police raids, the government could keep them as part of a national stockpile. 

Trump’s pledge that “on day one” he will fire Gary Gensler, chair of the US Securities & Exchange Commission (SEC), drew particularly strong applause from the crowd. Gensler has described bitcoin as “primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion and terrorist financing”. 

Gensler’s SEC has launched more than 40 crypto-related enforcement actions since 2023. Trump used to agree with Gensler, say Jack Simpson and Dan Milmo. In 2019, the then-president said that bitcoin was “highly volatile and based on thin air” and that “we have only one real currency in the USA… It is called the… dollar!” But he has since done a U-turn, saying that “if crypto is going to define the future, I want it to be mined, minted and made in the USA”. 

Trump is right that regulators have often unfairly targeted crypto operators, says The Wall Street Journal. Gensler’s SEC has sued crypto companies for violating securities laws when its own rules make compliance with those laws almost impossible. 

Still, bullish talk of a “strategic national bitcoin stockpile” sounds imprudent given bitcoin’s infamous volatility. Politicians should not be in the business of picking winners. “If cryptocurrencies really are a libertarian vehicle to invest free from political vagaries, then they should trade on their own without government help.”

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“We have a big currency problem,” Donald Trump tells Bloomberg Businessweek. The US presidential candidate flags the “strong dollar/weak yen, weak yuan” as a barrier to a revival in US manufacturing. Since the 1990s, US Treasury secretaries have generally taken the view that market forces should determine exchange rates, says Alan Rappeport in The New York Times. In 1995, Clinton administration official Robert Rubin even declared that “a strong dollar is in our national interest” as it helps to reduce government borrowing costs.

What a weaker dollar means for the US economy

Trump’s running mate, Ohio senator J.D. Vance, argues that a strong currency is effectively “a subsidy for US consumers but a tax on American manufacturers”. He wants the balance to be re-set in favour of America’s “hollowed-out industrial base”. A Trump White House would only have limited ways to weaken the currency, since interest-rate policy is in the hands of the independent Federal Reserve, the US central bank. One approach could be “to use the threat of tariffs to compel other countries… to strengthen their own currencies”. 

In 1985, the Reagan administration successfully persuaded Japanese and European leaders to do just that, says Kevin Dugan in The New York Intelligencer. The dollar fell 40% in the wake of the “Plaza Accord” and the US trade deficit closed. Yet Plaza was a deal done among Cold War allies – a similar attempt to devalue the dollar today would instead trigger a self-defeating race to the bottom with China. 

A weaker dollar would also raise prices. The Plaza deal sent US inflation above 5%. Trump’s programme of “pressuring the Fed to lower interest rates, putting up tariffs, and depreciating the dollar… are about the most inflationary things you can do”, says Jeffrey Frankel of the Harvard Kennedy School. The past few years have shown that high inflation is “politically toxic”. 

Trump’s other policies directly contradict his preference for a weaker greenback, says Jonas Goltermann for Capital Economics. Tariffs and tax cuts tend to boost the US currency, as shown by the dollar’s strength during Trump’s first term in office. There is some limited scope for officials to talk down the dollar on currency markets, but not even the president of the US can set exchange rates by diktat. 

Still, with US interest rates set to fall, Trump may not need to do much to achieve a weaker dollar. Many currency analysts think that it is due a fall anyway. Trump and Vance may “be pushing at an open door”, agrees Felix Martin for Breakingviews. In trade-weighted, inflation-adjusted terms, the greenback has appreciated more than 30% in the past decade and is close to its richest in 40 years. 

On balance, America benefits hugely from the dollar’s strength, says The Economist. It has helped to insulate US households from the inflationary surge that Europeans have suffered. It lowers US government borrowing costs. It does hamper exporters, but since the 1990s, America has still greatly outperformed other developed economies. Vance’s attempt to “cast America as a victim of the global financial system” is “almost laughable”.

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“No amount of blood or political rancour” can shake the market’s positive mood, says The Economist. From global wars to an escalating trade conflict with China to an assassination attempt, signs of political instability are multiplying. 

Yet stocks are “at, or close to, all-time highs in America, the eurozone and Japan”. The widespread belief on Wall Street is that a second Trump presidency will be good for investors. 

True, proposed tax cuts and looser public spending might boost profits, but if Trump abandons Nato or initiates “total decoupling from China”, then stocks will not be spared from the resulting “economic chaos”. With stock valuations already “sky-high”, an unambiguously protectionist president would be “a recipe for a crash”.

How are markets reacting to Donald Trump's presidency run? 

Investors have been piling into assets expected to benefit from a second Trump presidency ever since Joe Biden's disastrous debate performance last month, say Liz Capo McCormick and Natalia Kniazhevich on Bloomberg. Bitcoin and gold have rallied, while US bond yields have climbed on expectations of higher inflation under a Trump presidency. 

But Biden’s withdrawal has thrown “a wild card” into the race, which could spell more volatile trading ahead. Investors should always be careful when betting on politics, says Jon Sindreu in The Wall Street Journal. 

With the exception of bitcoin, most of the current “Trump trades” are similar to those that investors tried following Trump’s 2016 victory – sell the Mexican peso and buy “smaller, domestically oriented” stocks in “old economy” industries. That approach didn’t really work last time. “Small-caps performed badly” during Trump’s first term, while “industrials, energy and banks” lagged tech. Indeed, there is a good argument that it is not small US companies, but Big Tech – bruised by the Biden White House’s “antitrust zeal” – that would fare best under Trump.

Investors are also hoping for a repeat of Trump’s 2017 tax cuts, which triggered a corporate earnings bonanza. But scope for further reductions is limited, not least given America’s already yawning budget deficit. As Rabobank analysts put it, investors who are confident they know how a second Trump presidency will play out risk seeing their “Trump trade” turn into a “chump trade”, says Katie Martin in the Financial Times. 

The one near-certainty is that “Trump 2.0” would be inflationary because of a “huge increase in trade tariffs” and a “volley” of new unfunded tax cuts. The dynamic US economy might manage to sail on, but assets in allies in Europe and Asia could be in for a rockier ride. 

And then there is the “reddest of red lines” – hints that Trump may interfere with the independence of the Federal Reserve, the US central bank. Fed independence has been compromised before, says Ernie Tedeschi in the Financial Times. In the early 1970s, Richard Nixon leaned on the Fed to “keep monetary policy easy during his re-election bid”. That left the door wide open to crushing, prolonged stagflation when the 1973 oil crisis hit the following year. Rising US political risk “is likely being underpriced by markets”.

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When Usha Vance introduced her husband J.D. Vance as Donald Trump’s running mate at the Republican National Convention – in a speech which he later said had him “crying back stage” – she described him as a “meat and potatoes kind of guy” and praised him for embracing her vegetarian diet. It was an affectionate, but telling observation, says The Wall Street Journal. Perhaps the Ohio senator’s greatest strength is his adaptability and ability to play any role convincingly. “He can sound like a Silicon Valley venture capitalist one day” and a rabid populist the next. When searching for a running mate, Trump often mused: “Where is my Cary Grant?”. In the suave, smart, articulate Vance, he has found him.

Vance was a “brilliant choice”, says Samuel Popkin, a political scientist at the University of California. He has the skill of “making an opportunistic move seem like righteous change” – not least in his changing attitude to Trump himself. Before the 2016 presidential election, Vance called Trump “noxious”, “reprehensible” and suggested he “might be America’s Hitler”. Now, he “arguably outdoes Trump” in his demagoguery, says Ryan Bourne in The Times. And when it comes to economic policy, Vance has evolved to become “more Trumpy than Trump himself” in terms of honing his “blue-collar appeal”. The former president might have steered the US towards protectionism on trade and immigration, but at least he “upheld free-market principles”. Vance, by contrast, champions an “aggressively interventionist policy”, arguing that Republicans should embrace trade unions, raise the minimum wage, break up Big Tech, block mergers, tax corporations that outsource jobs and use state power to punish woke companies.

Although Vance will almost certainly trade on his heartland roots on the campaign trail, he has largely left his early life “in the rear-view” mirror, says The Observer. His story began in Middletown, Ohio – a steel mill entrepôt, which once drew thousands of economic migrants from across the Appalachian region – including his Kentucky-born grandparents – before suffering a devastating decline in the 1970s. “Our homes are a chaotic mess,” wrote Vance in Hillbilly Elegy, the bestselling 2016 memoir that put him on the political map – chronicling his mother’s struggle with drug addiction and domestic instability.

He credits his grandmother for raising him and pushing him to work hard at school. Vance viewed joining the United States Marine Corps as an escape from “the anger and resentment harboured by everyone around me” and served as “a combat journalist” from 2003 to 2007, taking in a six-month deployment to Iraq. He went on to study political science and philosophy at Ohio State University, later winning a scholarship to Yale Law School where he fell in love with his classmate Usha Chilukuri. They married a year after graduation.

The rise of J.D. Vance

The most influential figure in Vance’s rise was Peter Thiel, says the FT – the libertarian PayPal founder and venture capitalist who, in 2016, was one of the few in Silicon Valley openly to endorse Trump. When Thiel gave a talk at Yale in 2011, Vance was transfixed. He went on to join Thiel’s firm, Mithril Capital, crediting his mentor both with an introduction to venture capital and his conversion to Catholicism. When Vance came to found his own firm, he named it Narya Capital “in a nod to Thiel’s penchant for companies with J.R.R. Tolkien-inspired monikers”. When Vance decided to run for the US Senate in 2021, Thiel was his biggest donor. The following year he introduced Vance to Trump at his Palm Beach club, Mar-a-Lago. And if Vance looks like one of Trump’s sons, that’s no accident, says Dennis Altman on The Conversation. “For Trump, politics is an extension of the family business and Vance has cleverly positioned himself as a de facto son.”

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Despite being rumoured for weeks, US president Joe Biden’s decision to drop out of the presidential election “came as a shock to most political observers”, says Kaleigh Rogers for ABC News. 

Technically, the Democrats now have no candidate until they formally decide at their August convention, “so nothing is set in stone until that vote happens”. Vice-president Kamala Harris is, however, already calling herself the “presumptive nominee”, having quickly garnered widespread support.

Does Kamala Harris stand a chance?

She has also been endorsed by Biden and the Democratic establishment, so Harris “does look set to become the Democratic presidential nominee”, says Matt Goodwin on Substack. That will be a “total disaster” for the Democrats. She’s a “very unpopular vice president” – polls taken before Biden’s withdrawal suggest Trump will do much better against her than Biden, especially among “wavering Republicans” who would “certainly not flock” to Harris. 

What’s more, she “is just not a very good campaigner or natural communicator”. In a contest between her and Trump, it looks likely that “Trump will win and most likely win easily”. 

Don’t underestimate Harris, says Jacob Heilbrunn in The Spectator. 

Her early years as vice president were marked by scandal and press scrutiny, but that appears to have “toughened her up” and her public-speaking skills have markedly improved. Even immigration, seen as her Achilles’ heel given her role as “border czar”, isn’t the weakness it once was thanks to “record lows in crossings over the past few months”. 

Trump’s days may be numbered.

Biden stays put, for now

Biden will remain president until January and hence will continue to be “the most powerful person on Earth”, says Ed Pilkington in The Guardian. His priority is likely to be supporting Harris by ensuring continued progress on cutting immigration. 

But “merely holding the country steady to the benefit of whoever replaces him” is unlikely to satisfy a “legacy-minded” president. Congress is divided, but Biden could “shape the narrative of his presidency through executive orders”. He could cut student debt, for example – “a running theme” of his presidency. He may also seek foreign-policy victories and to shore up Ukraine. 

Biden is now a so-called “lame duck” president and this could decrease his leverage with foreign powers, says Felicia Schwartz in the Financial Times. Yet it “could also free him from political constraints and allow him to act with more freedom on the world stage”. 

The test of this will come when Biden meets Israel’s prime minister Benjamin Netanyahu and seeks to “advance what could be his most significant legacy: an end to the war between Israel and Hamas”. A Biden-brokered ceasefire deal would allow Harris to avoid the issue on the campaign trail. 

Biden’s decision not to run may even increase his leverage on the world stage, says Richard Haass of the Council on Foreign Relations, now that he might be “succeeded by someone who’s largely in line with him, as opposed to someone who might undo a good deal of what he stood for”.

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If Joe Biden’s catastrophic performance in the US presidential debate hadn’t already sealed it, then the attempted assassination of Donald Trump certainly did. It seemed inevitable that either the increasingly frail Biden would stand down or that he'd lose to Trump in November. Now that Biden's gone, he's taken “Bidenomics” – as the hugely expensive experiment in industrial subsidies and protectionism is known – with him.

Biden was elected as a moderate, unifying figure, but on economic issues, he has been the most radical US president for a generation. Bidenomics has been a hugely ambitious and highly expensive project to reshape the American economy. Massive subsidies have been offered to build green infrastructure and bring the production of vital equipment back to America. 

Money has been thrown at wind and solar power, building a new electricity grid, subsidising the switch over from petrol to electric cars, and decarbonising homes and offices. The government has opened its cheque book for a new generation of semiconductor factories designed to make the US the world leader in tech manufacturing. Meanwhile, tariffs have been slapped on Chinese imports, such as the 100% levy on electric vehicles (EVs).

The Biden economic plan

It is not hard to see what those in the Biden administration have been trying to do. They wanted America to become a leader in the production of green energy and reduce reliance on Chinese factories to keep phones, websites and data centres running. They believe dominance of green tech and chip production will secure economic leadership for the rest of the century, and thwart China’s ambitions to become the world’s leading industrial and financial power. 

The stakes are very high. There have been some successes. Solar power generation has grown by 75% over the last four years, and eightfold over the last decade, even if it still only accounts for 4% of energy generated in the US, compared with 60% for fossil fuels, and 18% for nuclear. Firms from Intel to TSMC have been building new semiconductor plants. But this has come at a huge cost. 

The total cost of the programmes will come in at $800bn, according to estimates by Credit Suisse, and given that most of the subsidies are in the form of open-ended tax credits the final bill may well be a lot higher. It is one of the main reasons why the government deficit has remained so high, at 5.3% of GDP, and why total debt has soared to 123% of GDP, even though the economy has been growing strongly and debt should be coming down.

US EV investment – a waste of money?

Much of the money has been wasted on a mind-boggling scale. For example, it included a $7.5bn plan for installing new EV chargers, so all those subsidised EVs could be powered up on the road. After three years, only seven chargers had actually been installed. 

There was a rural broadband plan to connect remote homes to the internet – at a cost of $42bn – but not a single home has been connected. The chip plants are coming online, but have been beset by planning delays and a lack of skilled workers. There’s little evidence the vast spending has improved competitiveness, lifted wages, or created durable new industries. 

EVs are increasingly looking like the wrong technology, the battery industry is crashing, and the chip market is awash with over-capacity. The US has been growing, but mainly on the back of deficit spending, and record shale oil and gas production that has made it the world’s largest producer of fossil fuels. 

Biden’s economic plan was pushed by a small group of radicals around the president and one reason they were so desperate to keep their man in place, despite his clear incapacity, was to keep control of the agenda. But there was very little mandate for this radical economic programme. As Biden goes, so will Bidenomics. And, given its dismal results, not before time.

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A US presidential campaign “already seething with contempt and chaos” took an “even darker direction” with the “most serious assassination attempt against a president or presidential candidate since Ronald Reagan in 1981”, says The Economist. 

While the “shocking” attempt on Donald Trump’s life thankfully failed, it highlights the rising political violence in America. The last few years have seen the attempted murder of Republican congressional leader Steve Scalise, the invasion of the home of then-House speaker Nancy Pelosi – and the “violent sack” of the US Capitol. It also provides yet another “twist and turn” in a contest that has already been “thrown off its rails”. 

The conventional wisdom is that the attack might move the contest “decisively” in Trump’s favour, says Gideon Rachman in the Financial Times. But the view that the “election is over” is a little too “fatalistic”. While many politicians might expect to gain a “significant sympathy vote”, Trump is a “highly polarising” figure. 

Millions of “never Trump” voters are unlikely to become “Yes Trumpers”, however appalled they are by the “vile attempted murder”. The sight of Trump surrogates, including his newly anointed running mate J. D. Vance, “already blaming the Democrats for the attempt on his life” could even end up whipping up passions that “might scare off some floating voters”.

Donald Trump and his brand

The assassination attempt and Joe Biden’s “erratic” debate performance a few weeks ago have both provided “unsettling reminders of how important it is to have a qualified successor in the wings”, says James Orr in The Telegraph. That’s why many Republicans were quietly hoping that Trump would pick a prospective vice-president who could either appeal to moderates, or someone from the establishment. 

Their hopes have now been firmly dashed. In choosing Vance, Trump has doubled down on his “nation-first brand of conservatism”, focused on protectionism, immigration controls and isolationism.

Is Trump winning voters over? 

Vance may not seem to be a natural Trump supporter, since he has a “résumé that trended towards the traditional centres of power in Republican politics”, and even “once blasted Trump as comparable to heroin”, says Gabriel Rubin on Breakingviews. 

However, recently he has become a “fully fledged Trump acolyte”, presenting the former president as “the change needed to reorient a sclerotic political system” that has “sold out” the interests of workers in favour of multinational corporations and “lax immigration policies”. Such an agenda plays on “a grim trend towards calcifying social immobility among working-age men”. 

Vance’s presence may win over voters in swing states, but it is “raising concerns across Europe that an already sceptical Trump might be persuaded to abandon Ukraine in its war against Russia’s invasion”, says The Wall Street Journal. Vance has called for US foreign policy to “pivot” from Europe to East Asia and he has also been a “leading voice among ultra-conservative Republicans opposed to sending funding to Ukraine”.

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“Central banks are winning the battle against inflation,” says The Economist, “but the war is just getting started.” US inflation has fallen swiftly from 9.1% two years ago to 3% last month. But a return to the low-inflation world that preceded Covid is unlikely. 

Donald Trump’s promise of 10% across-the-board tariffs if he re-takes the White House will send a new inflationary shock through the world economy, while green investment and climate change are keeping commodity prices high. 

Recent US inflation data undershot forecasts, reassuring economists that the country is well on the way to the 2% target. 

US economy and unemployment

Some have begun to fret that unemployment could be a bigger menace than inflation, says Matt Egan on CNN. Unemployment has ticked up to 4.1% and has risen for three months in a row, a “yellow” light that tight monetary policy is starting to hurt the US economy. Unless it begins to cut rates soon, the US Federal Reserve risks “injecting inflation-fighting medicine into an economy that no longer needs it”.

US rate cuts

A first US rate cut is expected in September, but one wonders why the Fed should wait, adds Aaron Back in The Wall Street Journal. Recent weeks have brought a succession of “warnings from consumer-facing companies that American shoppers are tightening their belts."

Just a few months ago some Fed officials were hinting that the US economy was so robust that they might not cut rates at all this year, says Edward Harrison on Bloomberg. 

But recent data suggests “the US is much closer to a recession than anyone thought”. Markets have thus almost gone back to where they were at the start of the year – predicting two to three quarter-point US rate cuts before the end of 2024. The prospect of easier money will support US stocks.

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Joe Biden met with Democratic governors recently as the president faces “increasingly concerning polls and growing calls to withdraw his candidacy” following a “calamitous debate performance” against Donald Trump, say Robert Tait and Sam Levin in The Guardian. 

Biden has blamed his “garbled” and “low energy” performance on jet lag from international travel, but there are reportedly 25 Democratic members of the House of Representatives preparing to call for Biden to step aside, and one Texas congressman already demanding that he stand down. Polls suggest that one in three Democrats think Biden should go.

What would Joe Biden leaving mean for the Democrats?

Replacing Biden might not provide the electoral boost that Democrats are hoping for, says David Charter in The Times. Even the poll showing that many Democrats want him to quit revealed that no prominent elected Democrat would do any better against Trump, although former first lady Michelle Obama did have a large hypothetical lead. Interestingly, the poll also found that Biden’s “disastrous” and “stumbling” debate performance hadn’t harmed him as much as many think – Biden and Trump “remain neck and neck among all registered voters”. 

There is no good option now for Democrats, says Janan Ganesh in the Financial Times. If they choose someone else to run, they are essentially saying: “We tried our utmost to sneak an untenable candidate past you but the scrutiny of a live television debate foiled us. Ah well, here’s his replacement.” But letting him run would be worse, as his age-related “glitches of speech and manner, glaring enough already”, are only likely to get worse. 

Some 72% of registered voters think he hasn’t the wherewithal to be president. The Democrat failing to find a replacement for Biden, which should have begun as soon as he was elected, is of a piece with the modern left: whenever it becomes obvious that something must be done, they find a way to avoid doing it.

Where is Donald Trump in the race? 

While Biden was struggling to finish his sentences and stay in the race, the Supreme Court dealt a “major blow” to one of the efforts to prosecute Donald Trump for election interference, says Jess Bravin in The Wall Street Journal. The court ruled that former presidents “enjoy sweeping immunity” for official acts while in office. 

Lower courts will now have to draw the boundaries between what counts as official and unofficial, but the ruling pushes the trial beyond the November election. It’s been accepted for decades “that a president is immune from civil liability for actions taken in office”, says an editorial in the Financial Times. 

But the court has now extended that principle, arguing that an “energetic, independent” executive should not be deterred from taking necessary action by concerns over potential criminal prosecution after leaving office. The court’s ruling shunts responsibility for holding the president to account to the Senate and House of Representatives. 

But by prioritising an “energetic” presidency over an accountable one, “the court’s conservative justices have chipped away at a central pillar of the American system”.

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As the UK gets ready for a general election, the US is as well with both Donald Trump and Joe Biden running for presidency again.

The 2024 US election is unique in providing a rare glimpse into market behavior, as both potential nominees have previously held the presidency. 

The stock market's performance during each presidential term offers valuable insights into potential future trends.

During Trump's tenure, the S&P 500 increased by 69.59%, driven by policies such as corporate tax cuts and deregulation. However, his presidency faced significant challenges, notably the COVID-19 pandemic, which led to severe market volatility and economic disruptions. 

Conversely, under Joe Biden, the S&P 500 has risen by 41.87% (data as of 20 June 2024), supported by substantial fiscal stimulus and infrastructure spending. Biden's term has been marked by the challenge of high inflation and a restrictive Federal Reserve policy, which has aimed to control inflation through interest rate hikes.

Amidst a restrictive Federal Reserve policy, the treasury market commands significant attention. Jerome Powell, appointed by Trump and retained by Biden, navigates the economy through a `challenging landscape marked by inflation concerns and interest rate hikes. It's noteworthy that the US is unique in having a debt ceiling, which merely allows the government to meet existing obligations rather than authorize new spending. The fiscal burden includes substantial interest payments on the deficit. During Trump's term, the Gross Federal Debt as a percentage of GDP increased by 19.5%, while under Biden, it decreased by 1.5%.

Unemployment rates provide another lens to evaluate economic performance. Under Trump, unemployment rose from 4.7% to 6.4%, primarily due to the pandemic. Biden's term has seen a significant recovery, with unemployment at a record low of 4%. The current economic narrative is dominated by inflation and the Federal Reserve's efforts to contain it through restrictive policies.

Analyzing sector performance reveals further implications for market impacts. Under Trump, the top-performing sectors were Financials, Technology, and Consumer Discretionary. Biden's term has seen Energy, Financials, and Technology sectors leading the charge. These variations highlight the influence of differing fiscal policies and broader economic factors on market dynamics.

Data sourced from stockcharts.com utilizing SPDR GICS sectors, Trump data time frame 01/20/2017 – 01/20/2021; Biden data time frame 01/20/2021 – present  

The election outcome alone doesn't determine market crashes or booms; rather, policy direction plays a crucial role. Significant policy advancements occur when one party controls both the White House and Congress. Current polls suggest we are far from this scenario. Thus, monitoring party platforms as campaigns intensify will be vital for economic predictions and subsequent market impacts.

How does the stock market perform during an election year? 

Historically, election years bolster stock market optimism. Typically, the S&P 500 starts slower in Q1, climbs until summer, stalls before the November election, and finishes with an average increase of 6.8%. Regardless of the election outcome, markets generally exhibit positive performance during election years.

Source: chart from Bespokepremium.com

What are possible fiscal policy implications on the stock market? 

The Tax Cuts and Jobs Act of 2017, a hallmark of Trump's administration, is set to expire in 2025. If re-elected, Trump might extend these cuts, potentially exacerbating federal budget deficits. Conversely, allowing the act to expire would raise the corporate tax rate from 21% to 35%. This shift occurs amidst a high-interest environment due to restrictive Fed policies, leading to increased treasury auction yields.

Both candidates have indicated potential tariff increases, which could boost revenue. Energy policy divergence is clear: Trump favors increased domestic drilling, while Biden leans towards cleaner energy initiatives. Defense spending is expected to remain robust under either administration. Traditionally, Republicans' lenient anti-trust stance might spark more merger and acquisition activity. 

Trump's first term was marked by his direct and often unpredictable targeting of corporations via social media, sometimes suggesting boycotts, which could potentially impact revenues. A critical factor to watch in a potential second term is the composition of his administration, which will likely differ significantly from his first term.

What could happen if Trump wins?

A Trump victory could lead to several notable market impacts. His administration's focus on deregulation and tax cuts could stimulate short-term market gains. However, these policies might also increase the federal budget deficit, particularly if the Tax Cuts and Jobs Act of 2017 is extended.

Trump's approach to trade, including potential tariff increases, could affect international markets and supply chains. His stance on energy policy, favoring increased domestic drilling, could boost the Energy sector but might face opposition from environmental groups and clean energy advocates.

Another potential impact is the influence of Trump's social media presence on individual companies and sectors. His direct communication style and willingness to criticize companies could lead to market volatility.

Moreover, Trump's potential second term would likely involve new cabinet members and advisors, whose policy perspectives could shape economic directions in unforeseen ways. Investors would need to stay vigilant about these appointments and their implications.

How should I position my portfolio? 

The dominant theme for the market remains the inflation outlook rather than the election itself. Markets tend to respond more to economic and inflation trends than to election results. Historical data indicates that remaining invested regardless of the party in power yields better returns than timing investments based on political leadership.

Source: chart from Bespokepremium.com

While the 2024 election will undoubtedly influence the US market, broader economic factors such as inflation, fiscal policy, and global events will play more significant roles. Investors should stay informed about policy developments and economic indicators to navigate the evolving landscape effectively. 

The ‘i’s have not quite been dotted, and the ‘t’s haven’t all been crossed, and the man currently in the White House isn’t at all willing to accept the result – but it looks as though Joe Biden is almost certainly going to be US president from 2021.

So, assuming we get through the next couple of months without some wild, wild upset, what does that mean for your money?

The assumption for now is that there will be gridlock. So you have a divided government with a Democratic president, and a Republican majority in the Senate (although in January, there’s another election in Georgia which could tip the Senate into a tie).

Gridlock is viewed as being good for markets, even now. The idea is that the government can’t do too much to mess things up. So Biden can’t pursue the more ambitious/extreme (depending on your politics) elements of the Democrat agenda, but equally you don’t have radical surprises from the Republican side either.

Also, markets are just relieved that there’s a result. Donald Trump might not want to go quietly, but it’s clear to everyone else that there’s a winner now, and it’s just a matter of getting through the admin of making him president.

So where might this view be wrong? No one can predict the future. But it’s worth considering different scenarios, so that you’re prepared for them. And it’s particularly worth looking at “unlikely” scenarios. Why? Because the “likely” scenarios are priced in; the “unlikely” ones are not, so those are the ones that can either wipe you out or make your fortune.

So what might happen next to surprise investors? When considering the actions that politicians or central bankers (or human beings in general) might take, you can generally assume that the average person (which is usually what matters) will follow the path of least resistance. So what is that path now?

What if the Trump era is erased?

There’s a lot of talk about how “Trumpism” is here to stay. Some are arguing that the 2024 candidate might even be Trump, or someone very like him.

I’m not sure that’s right – I suspect that Donald Trump made a lot of enemies in his own party. I suspect that for every Republican who thinks he was a genuine breath of fresh air, or that he represents the future for the party, there’s at least one more who went along with him through fear or tribal loyalty, and is now keen to put all that “unpleasantness” behind them.

The path of least resistance during Trump’s reign was to support him. The path of least resistance for many, following his downfall, is to desert him and go back to business as usual. Populism might be popular with some of the people, but it can be a real headache for a comfortable mid-ranking career politician.

There are parallels with the Labour party over here. There was a group of die-hard Jeremy Corbyn supporters who will never stop believing in him. Then there was a larger group of Labour party politicians who went along with him, but never felt comfortable doing so, for a wide range of reasons.

The one key thing that has happened in both countries as a result of populism is that the political mood music has swung decisively in favour of government spending, rather than any attempt at fiscal conservatism. And, in fact, it’s probably more correct to say that the causality runs in both directions – it’s reflexive. After all, in the States, the first prominent populist movement of this era, the Tea Party, was all for slashing government spending.

So, say you’ve got a sizeable group of Republicans who want to disavow Trump and wipe the slate clean. And you’ve got a pair of political parties who are broadly open to more government spending – all they disagree on is whether or not you need to bother soaking the rich to pay for it.

That’s a recipe for a much more consensual Senate than anyone might imagine right now. If the Democrats can give way on the tax-raising side of things, then everyone might be happy to wave through more spending than expected. That would get the reflation trade going even faster than perhaps markets expect right now.

Clearly, this is just one scenario. We’ll be looking at other potential scenarios – both bullish and bearish – in this week’s issue of MoneyWeek, out on Friday. Subscribe now to get your first six issues free.

Happy birthday to us! It was MoneyWeek’s 20th birthday earlier this week (our very first issue came out on 4 November 2000, slap bang in the middle of another disputed US election).

While everyone is focused on the short term of who will be president, we’re looking well ahead of that – to what will be the biggest investment themes of the next 20 years. We talk about everything from Britain’s green revolution to quantum computing to the five funds to buy and hold for the next two decades.

We’ve also got the verdict on our five questions for 2040 – thank you so much for all of your contributions, and judging by your answers, the one thing you’re all convinced of is that cash is on its way out. You can read the full results in the 20th anniversary issue, out now.

If you haven’t already subscribed, now really is an excellent time to do so – you can get your first six issues free here.

Even more excitingly, Merryn recorded a 20th birthday video interview with none other than Jim Mellon, a man who contributed a multi-bagger share tip to our very first issue. Find out what he’s buying now and what he thinks will be the biggest trends of the next two decades by watching the video right here.

We have not one but two podcasts for you this week. In the first, Merryn talks to Pictet’s Alain Caffort about the appeal of family businesses, and which he feels are the most promising today.

And I was lucky enough to speak to one of our colleagues over in the States – Jim Patterson of The Kiplinger Letter – to get his expert view on the US election, what happens next, and what it all means for the longer term, including America’s relationship with China and the potential for civil disorder.

One thing that seems very likely is that government spending on both sides of the Atlantic is going to rise a great deal in the coming months. So you might start hearing the word “deficit” a great deal. Make sure you’re prepared – get the full rundown on deficits, what they are, and why they matter (and why some people think that in fact, they don’t matter) in our new “Too Embarrassed To Ask” explainer video.

Here are the links for this week’s editions of Money Morning and other web stories you may have missed.

• Monday: Why you might want to add emerging market debt to your portfolio
• Tuesday: Does politics matter for investors?
• Merryn’s blog: Stakeholders or shareholders – where should capitalism’s focus be?
• Wednesday: Another shock US election result – who could have guessed this might happen?
• Thursday: Who is the Bank of England’s new £150bn of money printing really aimed at?
• Friday: The US election is a mess – and markets everywhere love it

Now for the charts of the week.

The charts that matter

Gold had a rapid rebound this week as the uncertain result on the US election gave way to a certain amount of conviction in markets that this will mean the Federal Reserve has to do even more money printing. The US dollar slipped back and gold rose substantially.

(Gold: three months)

The US dollar index (DXY – a measure of the strength of the dollar against a basket of the currencies of its major trading partners) saw a pretty steep fall this week...

(DXY: three months)

… and as a result, the Chinese yuan (or renminbi) strenghtened against the US currency (when the black line below rises, it means the yuan is getting weaker vs the dollar).

(Chinese yuan to the US dollar: since 25 Jun 2019)

The yield on the ten-year US government bond slipped back this week after reaching its highest level in a few months.

(Ten-year US Treasury yield: three months)

The yield on the Japanese ten-year remained pretty much where it always is – very near to zero.

(Ten-year Japanese government bond yield: three months)

The yield on the ten-year German bund was barely changed.

(Ten-year Bund yield: three months)

Compared to other risk assets, copper actually had a pretty mediocre week, rising gently compared to last week.

(Copper: nine months)

The Aussie dollar surged against its American counterpart as the latter declined.

(Aussie dollar vs US dollar exchange rate: three months)

Cryptocurrency bitcoin had an extraordinarily good week. It’s hard to pin down exactly what drives bitcoin but it certainly seems to like the idea that inflation might take off and that investors will seek safety in scarce assets. But perhaps more importantly than that is human nature. Bitcoin now has a demonstrable history of boom and bust and boom, so when it starts to move, ever-increasing numbers of people are going to pile in to make sure they don’t miss out on the next big wave.

(Bitcoin: three months)

US weekly jobless claims came in at 751,000 which was a little lower than last week (which was revised higher to 758,000). The four-week moving average came in at 787,000 from 791,000 (revised a little higher) previously.

Meanwhile, non-farm payrolls data for October revealed that 638,000 new jobs were added last month. That was a bit better than expected but not massively out of line with most analysts’ expectations, and as a result, didn’t do much to move the market, although the overall unemployment rate was a good bit lower than expected at 6.9%.

(US jobless claims, four-week moving average: since Jan 2020)

The oil price (as measured by Brent crude) rebounded somewhat this week as Russia and Saudi Arabia both made noises about continuing with existing production cuts.

(Brent crude oil: three months)

Amazon enjoyed a strong rebound this week, partly in line with wider markets and also due to a perception that a gridlocked US government represents less of a threat to Big Tech than one party or another having control.

(Amazon: three months)

Tesla had a pretty tame week all things considered, ending the week a little bit higher.

(Tesla: three months)

Have a great weekend.

John here – quick note before we start this morning: it’s MoneyWeek’s 20th anniversary and we’ve just released a very special video interview between Merryn Somerset Webb and investor and entrepreneur Jim Mellon, who contributed some extremely lucrative investment ideas to our first issue. Find out what Jim’s buying now and what he expects over the next 20 years by watching the video right here.

Three days on, and the 2020 US presidential election is still a mess. It looks as though Democrat Joe Biden, currently with 253 of the 270 seats he needs to win, has shaded it, though by a much smaller margin than anticipated.

Allegations of electoral fraud abound, however, and Republican Donald Trump has threatened to contest the result in court, though we don’t know what he will do until they finish counting the votes.

The Republicans, however, have held the Senate. That means it will be harder to push through the Democrat agenda. The Democrats, on the other hand, have held onto their majority in the lower chamber, the House, albeit with some key losses. A contested outcome was the outcome everybody feared – and markets have loved it.

Everything’s up – except the US dollar (and uranium)

The Dow’s up, the S&P 500 is up, the Nasdaq is up. Bond prices are up (yields are down). Gold and bitcoin prices are flying, the latter especially – we are now through the $15,000 barrier. Metals prices are up. Even oil was up – West Texas Intermediate went from $34 to $39, a 15% rally on the news.

It’s hard to find anything that’s down. Cameco (TSX:CCO, NYSE:CCJ), the world’s largest listed uranium producer, is about all I could find, suggesting that the uranium price will not like the news. Cameco continued a decline that started in the summer and it’s not hard to see why. Uranium is a highly politicised energy source, and not one that Democrats are known for championing.

Jerome Powell, chair of the Federal Reserve, America’s central bank, added some sauce to the mix yesterday by calling for more economic stimulus and issuing a warning to any Republicans who might stand in the way of this, as they did in the 2009 to 2011 period: “All of us lived through the experience of the years after the global financial crisis. And for a number of years there in the middle of the recovery, fiscal policy was pretty tight, and I just would say that we’ll have a stronger recovery if we can just get at least some more fiscal support.”

The 2 November copy of Barron’s magazine hailed Powell as “The Winner”, and if you want to get an idea of just how hubristic central banking has become, get this quote from yesterday: “Further [economic] support is likely to be needed to avoid further spread of the virus.” I’m hoping that’s a slip and he meant the economic damage caused by the virus, not the virus itself. I wasn’t aware economic support stoped viruses.

What would a Biden presidency mean for investors?

We have in Joe Biden a president who will favour fiscal expansion, even more so than Donald Trump. He has called for more than $4trn in tax increases and over $7.3trn in government spending over the next decade. That means greater spending deficits and a larger national debt.

The bulk of his tax increases will come by raising the top marginal tax rate paid by corporations from 21% to 28%. Perhaps some of the many US corporations that have just relocated onshore will move abroad again. I should send Biden a copy of my book! Higher tax rates do not equal greater government revenue, but that’s an argument for another column. Another target source for Biden’s new tax revenue will be a 12.6% Social Security payroll tax on individuals with annual earnings of more than $400,000. He’s after higher earners.

He will spend the money on infrastructure, education, the social safety net, and healthcare. Infrastructure gets $2.trn, while $1.9trn is slated for education – college and university will be tuition-free for children in families with incomes of less than $125,000. Healthcare and the social safety net both get $1.trn.

The Fed, as we have seen, is on board. Powell is calling for continued aggressive fiscal and monetary stimulus. “The Desk is prepared to increase the size and adjust the composition of its purchase operations as needed to sustain the smooth functioning of the Treasury market,” said Powell. In other words, the money is there to be had.

The big question then, is how much of this can Biden get through Congress? But all in all, we can sum it up by saying something we have said on these pages many times: “money printer go brrr”. The US money printer is going to brrr so loudly, you’re going to need ear plugs. The reverberations will be heard all over the globe. No wonder the US dollar tanked this week. No wonder bitcoin went through $15,000.

Britain and Europe will do exactly the same thing.

Asset prices will rise, and the value of money will fall. Those with assets will make good, those on salaries will suffer. The same trend that has been in place since 1971 continues, and it just got that little bit faster.

You can shout, you can scream, you can rant on Twitter. It won’t make any difference. You can’t change anything. But you can protect yourself. Own gold, own bitcoin, own assets. (If you read my column, you will already). Keep your head down, and enjoy the ride.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

Gosh. A surprise election result. Who could've seen that coming?

Turns out that Joe Biden didn’t win a landslide. For all we know, he might not have won anything.

I was hoping that this morning we’d be able to put all this unpleasantness (by which I mean, our obsession with US politics) behind us.

Apparently not.

Fiscal stimulus might not be as quick to arrive as markets had hoped

As I write this morning, it looks as though we’re not going to know who’s won the US election for a while.

Donald Trump has already said that he’s won. Joe Biden has also said that he thinks he’s going to win. There are loads of ballots still to count in various key states (this is one of the many elements of the US system that baffles me).

Whoever ends up winning on paper, we’re almost certainly going to see legal challenges. We’ll now be on edge about civil unrest, rogue headlines, angry recriminations on all fronts, and the minutiae of the voting systems of individual states for days, possibly weeks, maybe months. It’s like an angrier version of Bush vs Gore in 2000. In other words, from an uncertainty point of view, this is your worst-case scenario.

What does it all mean for markets though? The real issue for markets right now is not the question of unrest, or any of the other more overtly political issues that the pundits will be throwing about for the next few weeks. It’s not even mostly about who ends up being president. The real issue for markets is this: they’ve been hoping for a reflationary blast of refreshing fiscal stimulus, all funded merrily by the Federal Reserve under Jerome Powell.

Powell, along with the rest of the world’s central bankers, has made it very clear that money is there to be had. Governments just need to ask. And it seemed a sure thing that whoever won – Democrats or Republicans – there’d be an appetite for that extra spending. Democrats wanted a “Green New Deal”, while Trump is hardly known for his fiscal rectitude.

But now it looks as though no one party will be entirely in charge. That means they need to compromise and deal with one another to get any sort of big “stimulus” deal pushed through Congress. The odds of that seem… slim. As John Authers put it in his newsletter for Bloomberg this morning, “with a Republican Senate, we either have the economic status quo, dominated by monetary policy, under President Trump; or a Biden versus Mitch McConnell dynamic in which fiscal policy would become even more frugal.”

There’s also the concern that this might take a long time to be resolved. While that’s happening, stimulus is definitely not happening.

What does this mean for your investments?

So what does it all mean for your money? In the short term, my advice is not to worry about it. This is all noise. It’s very noisy noise, and obviously it’ll be a lot worse for any of our US readers (my sympathies). But it’s noise. As I’ve said before here, at some point America will have decided on a president.

You might bewail the democratic process, but bear in mind that only 15 years ago or so, we were all moaning that people were disengaged because politicians were all the same. You can’t say that now. Turnouts are huge, and results are tight, and candidates have very different positions to one another. This is what happens when large groups of people disagree over the best way to run a country. Don’t throw democracy out just because it’s working differently to the way you wished it did (although I’ll grant you that the admin side of the US system could do with improving).

In the longer term, the thing that would have the most impact from an investment point of view is any stalling in the handover from central bankers to politicians. What it boils down to is that Jerome Powell and his colleagues may be left propping markets up again.

Can they do that? Well, yes, frankly. There’s always more money to be printed – and who knows? In the absence of more spending from the government, maybe they would contemplate negative interest rates. So I’d expect looser monetary policy in the absence of fiscal policy picking up the slack.

So overall, I wouldn’t be making any changes to your investment plans off the back of this result (or lack of result). Don’t panic, don’t pay too much attention to the news (it's mostly speculation – I listened to three or four reporters in a row on BBC Radio 4 this morning re-state precisely the same point, only using different words), and stick to your plan.

And subscribe to MoneyWeek magazine. We’ll let you know the longer term impacts as and when the result becomes clearer. You can get your first six issues free right here.

How has America's president done?

Despite having to deal with a hostile press and political establishment, he’s had some wins. Take foreign policy. Critics charge Donald Trump’s nakedly transactional approach to international relations with putting the Western alliance and the international system under severe strain – to the despair of many of America’s long-standing friends and the grateful disbelief of Moscow and Beijing. And indeed, Trump’s fellow-feeling for authoritarian “strongman” leaders has been well-documented. Vladimir Putin struggled to keep a straight face at the July 2018 Helsinki press conference after his one-on-one with the US president – Trump lauded Putin’s “extremely strong and powerful” denial that Russia had tried to interfere in the 2016 US presidential election. But in terms of Trump-era foreign policy, two key events stand out – the bizarre geopolitical theatre that saw him attempt to cut a deal with North Korea and the deal brokered by him between the UAE and Israel – an accord that signalled a “significant shift in the balance of power in the Middle East”, says the BBC, and presented by Trump as a major foreign-policy coup.

But it’s the economy, stupid?

On the economy Trump has a strong claim to a positive legacy – and one that explains why, pre-Covid-19, he stood a fair chance of re-election. For all Trump’s obsession with short-term moves in the stockmarket, the long view is that Trump inherited a growing economy, and it kept growing on his watch. The pace of growth increased a bit in his first two years in office and America did notably well relative to other major economies, before growth slowed down a bit in 2019. What’s more, thanks to a decade of growth, wages were finally rising in real terms, even for lower-income workers. Trump’s overall economic record is problematic, says Josh Barro in New York magazine, partly because his tax cuts were so skewed to the rich. But he deserves credit for getting some big decisions right – for example, in appointing a Federal Reserve chairman, Jerome Powell, who focused on growth (rather than the spectre of inflation) and kept interest rates low.

Did Trump’s tax cuts work?

Trump’s early cuts in corporation tax did raise post-tax profits, which is one reason the US stockmarket has done relatively well under this president, says The Economist. Yet the long-term boost to growth from Trump’s tax reform is estimated at a mere tenth of a percentage point per year or less. The US has also attracted more foreign direct investment. The irony, though, is that a “crude stimulus to growth” might not have been needed were it not for Trump’s trade wars and tariffs, which “hurt confidence and weighed on global growth”. Overall, research suggests that tariffs have pushed up consumer prices by 0.5% and destroyed more US manufacturing jobs than they created (by making imported parts more expensive and inviting retaliation from other countries).

And deregulation?

The administration says that its bonfire of red tape eliminated $51bn of regulatory costs between 2016 and 2019. But that is only about 0.2% of one year’s GDP, says The Economist. It also ignores any public benefits from regulation and there has been scant sign of the promised boom in business investment. Trump deserves some credit for steady growth and the best labour market in years. But “despite that, he is overselling Trumponomics. It was both a help and a hindrance”.

What about the public finances?

My verdict on the US economy under Trump would be “a modest acceleration from an unexpected source”, says Jon Hilsenrath in The Wall Street Journal – that source being government spending. The US federal deficit grew steadily under this Republican president, before ballooning this year to around $3.3trn, or 16% of GDP – the highest since World War II. Trump’s most lasting (if partly “unintended”) economic legacy will be to shift the economic conversation towards protectionism and away from deficits, argues Patricia Cohen in The New York Times. No matter who wins next week’s election, future US economic policy is “likely to pay more attention to American jobs and industries threatened by China and other foreign competition and less attention to worries about deficits caused by government efforts to stimulate the economy”. In theory, the unprecedented trillion-dollar deficits run up by Trump (by cutting taxes and raising spending) should have “caused interest rates and inflation to spike and crowd out private investment. They didn’t”. Paradoxically, the main beneficiary could be a president Joe Biden: Republicans will find it harder to attack Democrat spending plans as fiscally irresponsible given the past four years.

Does Trump deserve re-election?

No, says Jennifer Rubin, a conservative commentator who is hostile to Trump, in The Washington Post. His failure to counter Covid-19 is an economic catastrophe as well as a human one, she says. Blinded by the need to run for re-election on the economy, he first tried to downplay the pandemic and has “refused to understand that without a strategy to control the spread” of the virus “we will not enjoy a sustained economic recovery”. Even so, says Irwin Stelzer in The Sunday Times, the US economy is in “far better shape than we dared expect only a few months ago”. Some analysts think GDP will end the year only fractionally lower than 12 months earlier and America will probably be the best-performing G7 economy in 2020, perhaps by some margin. So if it really is the economy, stupid, it’s not clear who Americans should vote for. Those who want to see an end to the “chaos and vulgarity” of Trump must “bear the risks that Biden’s programme creates for the recovery. Neither an empathetic Trump nor a risk-free Biden is on the ballot”.

The US presidential election has been one of the most bitter and contentious in living memory. With 3 November now less than three weeks away, you may be tempted to go and lie down in a dark room until the dust settles. But that could be a mistake. We have often pointed out that people tend to overestimate the impact that politics has on investment portfolios; in America’s case, the economic cycle is generally far more important than the election cycle. But this contest could prove an exception to the rule – especially since there is a chance that the result may not be clear for some time. So it is worth reviewing what a victory for Joe Biden or Donald Trump could mean for your portfolio, and what impact the vote for Congress or a disputed election could have.

What might happen to monetary and fiscal policy? And will some sectors thrive whatever the outcome?

Scenario 1: Joe Biden wins

Both the polls and the betting markets have Joe Biden as the clear favourite. Betting exchange Betfair putting him at 1.53 to win, which works out at a 65.3% chance of victory. Nate Silver of fivethirtyeight.com gives him a 10% lead in national polls – much larger than Hillary Clinton’s at the same point in 2016 – and an 84% chance of winning in the electoral college. Even Election Projection, run by Republican Scott Elliott, suggests that Biden will get at least 334 electoral college votes, comfortably more than the 270 needed to enter the White House.

One sector to profit from a Biden victory is clean energy and renewables. Eoin Murray, head of investment at the international division of Federated Hermes, points out that Biden has not only pledged to rejoin the Paris Agreement, which commits America to working with other countries to reduce carbon emissions, but he also wants the US economy to be “completely powered by clean energy by 2050”. He will spend around $2trn over four years, including large amounts on research and development (R&D) in order to speed up innovation in green technology.

Healthcare stocks are trading at historically low multiples of earnings in anticipation of a Democrat victory. The worry is that a possible clampdown on drug pricing and further reforms to the US system of private health insurance will crimp profits. But some health insurers could benefit from a Biden win. His healthcare plan wants to reduce the number of people without some form of health insurance (currently around 30 million) through subsidies, essentially an expanded form of the “Obamacare” plan that came into effect in 2014. Murray argues that bringing more people into the system would be good news for the insurance companies that provide a type of insurance called “managed care”: those who have contracts with healthcare providers and medical facilities to cut prices for their members but restrict the range of hospitals policyholders can use, lowering their costs.

Then there is global trade to consider. A Biden victory would also be perceived as positive for companies outside the US, especially those in emerging markets and Asia. US firms that rely on cheap imports should also do well from a changing of the guard in the White House. Overall, while US hostility towards China “looks certain to continue”, Biden’s approach should be “less impulsive and confrontational than Trump’s” and will generally make “for less of a roller-coaster ride”, on issues such as trade, says Rupert Thompson, chief investment officer of Kingswood.

While some of Biden’s policies will be positive for the market, others are likely to have more mixed effects. Murray notes that a key part of Biden’s healthcare programme is to drive down costs, by capping the prices of the most expensive drugs and encouraging doctors to use cheaper generic versions of branded drugs, where possible. This will be bad news for drug and biotech companies which rely on high drug prices to make money.

Biden’s plans for a higher federal minimum wage, which is currently a third lower in real terms than it was in 1968, after taking inflation into account, will also produce winners and losers. While the measure could boost consumer spending, helping those companies that sell consumer goods, firms that employ a “large number of lowly-paid workers” could see their margins eroded. Biden also wants to raise taxes to pay for increased government spending, including increasing corporation and capital gains tax, both of which could hurt the market as a whole (see page 4).

Scenario 2: Trump is re-elected

While Trump is clearly languishing behind Joe Biden, the unpredictability of the electoral system means that it would be a mistake to write him off. If he does manage to pull off a shock victory, then this is likely to be good news for American oil and gas companies, especially those involved in shale oil and gas, says Randeep Somel, associate fund manager at M&G Investments. Trump is eager to cut regulations in order to boost output, although the sector still faces long-term pressure from the decreasing cost of renewable energy.

Trump’s support for fossil fuels also means that energy-intensive industrials are also “likely to perform better if Donald Trump wins a second term, since they will benefit from access to a cheap source of energy”. Republican support for continuing to increase military spending will also be good for defence firms. Bank stocks will do well from Trump’s efforts to undermine regulations put in place after the financial crisis, as well as from the fact that “taxation will be lower under Trump than compared to Biden’s policies”.His protectionist outlook, however, could also cause problems for companies in emerging markets, and those American companies who benefit from cheap imports, especially if the president maintains his “adversarial” stance around trade relations.

Scenario 3: a sweet spot for markets?

While all eyes have been on the race for the presidency, that’s not the only thing at stake in this election. American voters will also get to vote on the entire House of Representatives, while a third of the Senate is also up for re-election. While the House of Representatives is almost certain to remain in the hands of the Democrats, the Senate is up for grabs, with the Republican majority threatened by several close races in several states (in the event of a Senate tie, the vice-president has the deciding vote). This means that there is a good chance that the Democrats could sweep both Houses of Congress, as well as the White House.

Such a “sweep” would be good for the sectors that already stand to benefit from a Biden victory, since it would make it much easier for the Democrats to implement their agenda, says Reto Cueni, chief economist of Vontobel Asset Management. So, if this happened, renewable energy companies, those involved in infrastructure, and oil and gas companies outside the US, would also see decent gains. However, the downside is that those companies set to do badly from a Biden victory, such as financials, would do even worse as the Democrats implement their entire programme. There might even be pressure for Biden to go further on increasing taxes.

By contrast, a split Congress, where Biden won, but the Republicans retained control of the Senate, could set off a “relief rally”. In this case, shares, in both the US and the rest of the world, would benefit from Biden’s more conciliatory stance on trade leading to “reduced geopolitical tensions”. However, shares would also do well because he would have to tone down planned tax increases and additional regulations in order to get them passed into law.

Scenario 4: an ugly stand-off

If a split Congress and a Biden victory represent a “sweet spot” for markets, then the “nightmare scenario” is a disputed election, where one side refuses to accept the result, says Russ Mould of stockbroker AJ Bell. Many investors have “bad memories” of the 2000 election, when George W. Bush and Al Gore fought over a recount in Florida. By the time the Supreme Court finally ruled in Bush’s favour, the S&P 500 had lost 12% of its value. Of course, the “bursting of the technology, media and telecommunications bubble” also weighed on markets at that stage. Still, it’s undeniable that investors would “take fright” if one side refused to back down, “and where the United States goes, the rest of the world follows”. The uncertainty would be likely to prompt a “dash for save-haven assets”, good news for gold and the Japanese yen, but “bad for the dollar and global stocks”.

The “large-scale use of postal votes”, Trump’s claims about the “possibility of voter fraud” and his apparent refusal to confirm that he would hand over power all mean that a close result for either candidate is likely to be disputed, says Paul Craig, portfolio manager at Quilter Investors.

However, such a scenario is not inevitable, especially if Biden wins convincingly enough to make any challenge redundant. Even if Trump does try to string things out, the US constitution has a clearly-defined process for determining the result, including the provision that if things break down completely, the speaker of the House of Representatives (Democrat Nancy Pelosi) will be sworn in as acting president, which the Republicans would want to avoid at all costs.

And even though Trump has prevaricated on whether he will accept defeat, several senior Republicans, including the current Senate majority leader, Mitch McConnell, have promised that there will be an ordinary transfer of power, with the winner of the election sworn in on 20 January next year. Trump’s allies, such as senator Lindsay Graham, have said that, while Trump will be entitled to take any challenge as far as the US Supreme Court, they will accept the court’s judgment, even if it goes in Biden’s favour.

If post-election uncertainty does push stocks down, this could quickly reverse itself once things are resolved, says Craig. Shares have demonstrated their “remarkable ability” to bounce back swiftly from shock events once already this year, when the S&P 500 fell a third in the space of a month, only to recover all the lost ground by late summer. It is therefore “not beyond the realms of possibility” that they will be able to do so again.

What won’t change: spending and money printing

The overall stockmarket backdrop seems unlikely to change much. Federal Reserve chairman Jerome Powell has publicly supported the idea of a further fiscal stimulus. He has said that monetary policy and fiscal policy should “continue to work side by side to provide support to the economy until it is clearly out of the woods”. The Federal Reserve, meanwhile, will continue to print money whoever wins. All this in turn implies further dollar weakness – an additional tailwind for US stocks. A weaker greenback boosts the value of foreign sales at US companies, which in the case of the S&P 500 comprise around 45% of overall revenue.

Despite the deep divisions between the two candidates, moreover, there are some areas of policy agreement that should benefit particular sectors. So, if you want to “election-proof”, your portfolio, these are worth a look. Firms in cyclical sectors, notably medium-sized retailers, should do particularly well, reckons Mould. Not only are these companies cheap relative to the rest of the market, but they should benefit from the inevitable post-election fiscal stimulus, as both candidates are committed to accelerating the recovery from Covid-19. Both candidates are also hoping for a resolution to the crisis in the form of a vaccine, as soon as possible, with Pfizer promising to have enough data to request emergency-use authorisation by the end of the year. While the US Food and Drug Administration (FDA) has suspended the US trials of AstraZeneca’s vaccine, its trials have restarted in the rest of the world, and they would find it hard to refuse authorisation if results were encouraging.

At the same time, technology companies will face headwinds whoever wins. Indeed, Facebook and Twitter have managed to find themselves in the crossfire with Biden and the Democrats accusing them of fostering division and turning a blind eye to election manipulation, while Trump and the Republicans have claimed that they are censoring conservative opinions. As a result, it is likely that the winner will continue to attempt reform of Section 203, the US legislation that shields social media platforms from any liability connected with the material that they host. Big Tech as a whole, meanwhile, has incurred the wrath of the House antitrust committee.

The stocks and funds to consider now

Biden’s plans for reducing carbon emissions, “which go further than any previous Democratic presidential hopeful”, says Whitney Voûte of the US Solar Fund, should help renewable-energy stocks. They have already ticked up in anticipation of his victory.

The iShares Global Clean Energy UCITS ETF USD (LSE: INRG) is an exchange-traded fund (ETF) that tracks the S&P Global Clean Energy index. It invests in 30 large renewable-energy companies, roughly half of which are headquartered in the US.

The two biggest holdings are Sunrun, a California-based residential solar power, and SolarEdge, an American firm working with Tesla Motors to produce cheap battery storage for residential solar panels.

The only downside is that the ETF has a trailing price/earnings (p/e) ratio of 32. The fund has an ongoing charge of 0.65% a year. If you want a more direct bet on the American solar power industry, then it’s worth considering the US Solar Fund (LSE: USF), which aims to invest in a portfolio of solar power farms across the US.

It runs 38 plants across America, spread across four states (North Carolina, California, Oregon and Utah), and is in the process of building three more.

The fund currently pays a dividend of 2%, but hopes to increase this to 5.5% once all plants are fully operational, targeting an overall return on invested capital of 7.5% over the lifespan of the project.

However, if you think that Donald Trump will win, then you might consider Exxon Mobil (NYSE: XOM), America’s largest oil producer. In stark contrast to other energy companies, which have cut their dividend and increased their investment in renewables, Exxon has stuck with fossil fuels and remains a major shale producer.

While the market clearly expects Exxon’s management to go back on its promise to maintain its dividend, the current yield of 10% means that even a large cut will still give investors a hefty payout at current prices.

A Trump victory could also boost the shares of financial stocks such as Bank of America (NYSE: BAC). Experts suggest that Biden’s tax reforms could hit Bank of America particularly hard, reducing its profits by nearly 10%, while the group could also suffer from higher compliance costs. Bank of America trades at 12.5 times 2021 earnings and has an above-average dividend yield of 3%.

Both candidates have proposed spending large amounts of money on infrastructure if they win, both in order to speed up the recovery from Covid-19 and to upgrade America’s productive capacity, bosltering future growth. The drive to improve infrastructure will lead to an increase in the demand for heavy equipment. This is good news for industrial and construction-equipment rentals firm United Rentals (NYSE: URI), which we’ve tipped several times in the past. The stock trades at a mere 12 times 2021 earnings.

Another equipment-rentals firm worth investing is Ashtead Group (LSE: AHT), which, although listed in the UK, derives 90% of its revenue from North America via its subsidiary Sunbelt Rentals. Sunbelt operates in 700 locations throughout the United States. Ashtead has enjoyed strong growth, with its revenue doubling over the past four years, more than justifying a valuation of 18 times 2022 earnings.

What happens if the US president dies?

The vice president takes over, under the 25th Amendment to the US constitution, adopted in 1967. This sets out that the vice president automatically becomes president (not just acting president). It also creates a process for an ailing president voluntarily to transfer power to the vice president. And it provides for circumstances in which a president either cannot or will not invoke the amendment. The vice president, backed by a majority of cabinet members, can invoke it by writing to Congress. But if a reluctant president is well enough to disagree, Congress must decide it by a two-thirds vote. There’s plenty of room for rancour, division and instability – and even more so if the vice president is also out of the picture. In those circumstances, the speaker of the House of Representatives becomes president.

What if a candidate dies?

If Trump or Joe Biden withdraws or dies before election day, their party’s national committee would find a new candidate. They could promote the vice-presidential candidate (at risk of legal action from rival claimants) or hold an emergency convention, where delegates vote on the new nominee. The problem is that millions of votes have already been cast. It is almost inconceivable that the election would be delayed: its timing is fixed by the constitution and delay would require rapid (and unlikely) agreement by Congress. What’s most likely is that the election would take place on time with the deceased or incapacitated candidate’s name on the ballot, reckons Rick Hasen, a law professor at the University of California. However, under the electoral college system there would then “be a question if [state] legislatures would allow presidential electors of each state to vote for someone other than the deceased candidate” – namely the party’s replacement one.

Would they permit this?

In any kind of contested scenario the Supreme Court would probably have to decide “whether it is constitutional for states to ‘bind’ their electors to vote for the candidate who won the popular vote in that state” if that candidate is now dead or incapacitated, says New York University law professor Richard Pildes in The Washington Post. Although it might sound the most sensible route in the interests of political stability, it is not certain that the court would agree. This summer it ruled against three so-called “faithless electors” from Washington state, who ignored their state mandate to vote for Hillary Clinton.

What if a president-elect dies?

The 20th Amendment offers some guidance, but not certainty. If the winner died after the election but before the electoral college votes on 14 December, there would be legal-political wrangling. If the president-elect were to die after Congress formally declares the winner on 6 January but before inauguration on 20 January, the vice president-elect becomes president, says Pildes. If the president-elect were to die after the electoral college vote on 14 December but before 6 January, “things start becoming less straightforward”. The decision probably falls to the House of Representatives, with the vice president-elect becoming acting president if necessary until a choice is made. If the president-elect were to be merely incapacitated, “neither the 20th nor the 25th Amendment provides any guidance for what would happen next”, says Timothy Naftali in Foreign Policy.

Is a contested election likely?

Biden has firmed up in the polling and the betting markets over the past week, but the risk of a contested vote is real. For months Trump has questioned the legitimacy of the ballot – calling it “the most rigged” in US history – and claimed that the Democrats will try to “steal” the election. In last week’s presidential debate, the president refused to disavow white supremacist militias and urged supporters to go to polling stations and “watch very carefully” because “bad things happen”. His apparent preparing of the ground to contest his possible defeat has stirred fears about political instability, social unrest and constitutional mayhem if the result is anything other than a Biden landslide.

Is that realistic?

Yes. A particular focus for Trump is the shift to widespread postal voting. There is no evidence to suggest, as Trump frequently does, that mail-in voting facilitates fraud. However, there is plenty of reason to expect logistical challenges, delays, confusion and legal arguments. In one scenario, Trump could try to claim victory based on in-person voting on election night, while piles of mail-in ballots sit waiting to be counted in key swing states, such as Pennsylvania. Rosa Brooks, a law professor at Washington DC’s Georgetown University recently gathered grandees from both parties to “wargame” how different election results might play out. “A landslide for Joe Biden resulted in a relatively orderly transfer of power,” Brooks told The Washington Post. “Every other scenario we looked at involved street-level violence and political crisis.”

What does all this mean for investors?

There are always good reasons for keeping a close eye on the election result. But investors are having to absorb the fact that political risk is a new factor in US markets, says Gillian Tett in the Financial Times. Recent movements in derivatives prices suggest that investors are scrambling to hedge against expected wild volatility around next month’s election. “The 2020 presidential election has seen an historically wide margin of event risk priced across asset classes by options markets,” says JP Morgan. What is “doubly striking” is that these derivative bets extend far beyond early November, into 2021, says Tett. At best, that suggests investors fear an “extensive dispute” comparable to Bush versus Gore in 2000. At worst, they fear a lasting crisis involving political impasse and unrest.

US stock indices shrugged off news of Donald Trump’s hospitalisation over the weekend. The S&P 500 hit a one-month high as Trump was discharged on Monday. Yet the early optimism was undone when Trump ordered an end to talks with Democrats on a second stimulus bill. The S&P 500 finished Tuesday down by 1.4%.

The first stimulus bill lapsed over the summer, leaving unemployed Americans to depend on a patchwork of measures rolled out by the White House and individual states. The Democrat-controlled House of Representatives had initially called for $3.4trn in new support measures before reducing its demand to $2.2trn last week, while the Republican-controlled Senate favoured a figure closer to $1.6trn.

Would equities prefer Biden?

Trump’s surprise announcement that he would ask Republican allies to stop negotiating a stimulus will please fiscal conservatives wary of ever more federal spending, says the BBC’s Anthony Zurcher. Yet it is difficult to see how this benefits Trump politically. A new wave of economic angst before the election will do the incumbent no favours.

The odds of a Joe Biden victory leapt over the weekend in betting markets, says Irwin Stelzer in The Sunday Times. That could be good for stocks, which “abhor uncertainty” when Trump is “uncertainty incarnate”. JPMorgan and Citigroup argue that a Biden presidency will be bullish for shares. They say it could deliver an economic “sugar high” from stimuli, especially if Democrats also take the Senate, as is looking increasingly likely.

In reality, investors are broadly agnostic about who prevails in November, Scott Knapp of CUNA Mutual Group tells the Associated Press. “It’s pretty difficult to overstate how understated the market’s reaction was,” to the president’s Covid-19 diagnosis. Investors don’t care for Donald Trump’s trade wars, but they seem just as unexcited about Joe Biden’s tax and regulate agenda. What does scare them is the prospect of a disputed election.

The president is unwell

Most presidential health scares make little impact on markets, but there have been exceptions, says Lex in the Financial Times. Eisenhower’s heart attack in 1955 saw the S&P 500 fall by nearly 7%, while it dropped by 3% following JFK’s assassination in 1963. Yet three months later – and this applies to nine out of ten pre-Trump health incidents – the market was either up or down by less than 1%. (The exception was Truman’s 1952 hospitalisation.) That is a testament to the strength of America’s institutions, which do not depend upon the health of one man.

Trump’s illness may have a larger impact than usual as it could shape US pandemic policy, says Jeremy Warner in The Daily Telegraph. Yet all this fretting about the election and American democracy seems overdone. Investors may complain about Washington, but they still buy the dollar and that says a lot more than words alone.

Is there really a revolution under way in the US? Look at the voting numbers on the election and the argument isn't as easy to make as you might think.

You can divide electorates up into four groups: the ones who always vote for Party A; the ones who always vote for Party B; the ones who can't make up their minds (the undecided); and finally the ones who don't vote. The focus in elections is always on the undecideds the ones who make up the political middle ground and in the end decide who wins. In the US that means the "battleground states" the ones neither side is sure of winning.

Look at the US election with that in mind and you will note that there was no great surge in Republican support. In fact, it looks like the Republican vote in this election was much the same as its share in the 2012 election. The change here was not Trump swaying people to his cause. It was Clintonlosing them from hers: fewer people voted Democrat than in 2012 and it was that (loss not gain) that gave Trump Florida (29 electoral votes), for example. The other votes either stayed home (voter turnout looks to be a little below 2012) or went for various non-viable candidates (an easy cop out for those who know they should vote but couldn't cope with either Trump or Clinton).

We will see what that means for the next election when all the data is in. But it could be that despite all the hysteria there is no real need for America's Democrats to move very far left or right to win the next election. Pretty much any polite, clean-cut person standing on a moderate centre-ground ticket, who is not related to a previous president, will probably do the trick.

Unless of course, against all expectation, Donald Trump turns out to be a good president and manages to increase the Republican share of the vote next time round.

For now, I'm thinking about the huge number of people who didn't vote. Do they not bother because a) they are so disillusioned with the process and the political culture that they think it will make no difference at all, or b) because life is really just fine so it's not worth the bother?