Donald Trump was inaugurated this week, being officially given the keys to the White House for a second time. So far, there is little sign that distinguishing between posture and policy will be any easier this time around. Nonetheless, the first few days of his administration have provided some additional clarity. Most notably, perhaps, was a more dovish approach to tariffs. Meanwhile, the prominent role of Big Tech CEOs at the inauguration highlighted the likely importance his administration will place on AI, specifically, and economic growth, more broadly. The bigger picture is that the probable outcome of Trump 2.0 remains

During the U.S. presidential election campaign, Donald Trump promised to fix the economy by eliminating inflation, cutting taxes and increasing tariffs. This raises a challenge for asset allocators as to how these policies will hit expected asset returns in the short and long run. The incoming president will inherit a robust economy with a labor market in rude health and unemployment at only 4.1%. Real wages are rising and job openings, although down from post-pandemic levels, are still at the same highs reached during 2018-19, as shown in exhibit 1. Exhibit 1: U.S. Labor Market Indicators Furthermore, the ex ante

Donald Trump’s return to the White House, from next year, presents China with fresh challenges — especially in the wake of a persistent real estate crisis, weak internal demand and growing imbalances related to production overcapacity, as well as an ageing population and high levels of indebtedness, which will continue to weigh on China’s economic dynamism on a short- to medium-term horizon. Although the latest indicators showed some signs of stabilisation in activity (e.g., industrial production, retail sales), the downwards evolution of prices in China continues to reinforce the weakness of household consumption and the deflationary risks that limit the

As part of his re-election campaign, Donald Trump proposed a 60 per cent tariff on all Chinese goods. Whether he implements it or not, the US President-elect’s threat may be intended to bring Beijing to the negotiating table. But even if he succeeds in striking an agreement, it seems less clear that such a deal will lead to an increase in US exports to China. A study from the Peterson institute on the ‘Phase One’ deal between the US and China, agreed at the end of Trump’s last term, shows that China has bought none of the extra $200 billion

US markets have reacted positively to Donald Trump’s re-election as US President, much as they did in 2016. Once again President-elect Trump ran his campaign on a ticket promoting an ‘America first’ agenda. Back in 2016, expectations around these policies – such as deregulation, a tougher stance on China and corporate tax cuts — led the S&P 500 to post significant gains in the first 100 days after the election. A similar pattern seems to be taking hold this time too. Refresh this chart in your browser | Edit the chart in Datastream Speculation about the prospect of looser financial regulation, a

The United Kingdom faces a defining moment as it prepares for the grand finale of Brexit, a process that has lasted three and a half years.  During this time, it also needs to prepare for how it will negotiate trade deals with its global counterparts.  The U.S. is a key trading partner for the U.K. and will need to work on a future trading agreement. Negotiating a deal will be intensive for both parties and according to Reuters, Presidential Candidate Joe Biden has made it clear about one of the requirements for any trade deal with the U.K.  Biden has

The World Renewable Energy index has outperformed the MSCI global equity benchmark by more than 100% so far this year. Should he win the election this week, Joe Biden has signalled that he would rejoin the Paris climate change agreement and has earmarked $2 trillion towards spending on climate-related projects. These factors help explain why there has been a strong correlation between Biden’s polling and the relative performance of global renewable energy stocks. But the correlation between these two series only firmed up in in October – there was little relationship between the two earlier this year. Incoming legislation in

One of the Trump administration’s major accomplishments was corporate tax reform. U.S. presidential candidate Joe Biden proposes raising the corporate tax rate by 7 percentage points to 28%. If former Vice President Biden is elected and his corporate tax plan is enacted, the S&P 500’s current earnings estimates could see a roughly negative 10.6% impact. Exhibit 1: S&P 500 Y/Y CapEx vs. Effective Tax Rate Note: Based on current constituents and weights The Tax Cuts and Jobs Act of 2017 (TCJA) cut the U.S. corporate tax rate from 35% to 21%. One of the goals of this tax cut was

Through one of the most volatile years on record, the S&P 500 has managed to record a total-return of 9.4% year-to-date.  The S&P 500 also reached a new all-time high on September 2nd thanks to the strong performance of FAAMG stocks (Facebook, Amazon, Apple, Microsoft, and Alphabet).  With fears of a second COVID-19 wave and a contentious U.S. election ahead, uncertainty remains at record levels.  As a result, we look at valuation levels to gauge future investment decisions considering this environment. The graph above displays the inflation-adjusted (real) P/E ratio of the S&P 500 since 1900.  The Shiller Cyclically Adjusted

The Misery Index is defined as a combination of the unemployment rate plus inflation rate for a country.  Rising prices combined with a large unemployment rate is undesirable but one that the U.S. partially faces today given the impact of COVID-19.  The U.S. Misery Index peaked at 15.0% in April 2020, a level not seen since 1982. Exhibit 1 provides a global picture of the Misery Index.  The U.S. saw the largest spike in the index out of the countries selected below during COVID-19.  Canada saw the second largest spike during 2020.  Japan has been able to maintain its low

Presidential candidate Joe Biden has been adamant on raising corporate and personal tax rates if elected in November.  However, there has been a global trend to reduce corporate tax rates and become more competitive.  According to the Tax Database from OECD, 18 of 33 countries have lowered statutory corporate tax rates in the last 10 years.  Most notably, the U.S. significantly lowered corporate tax rates in 2018 from 35% to 21%. Only six countries including Portugal, Turkey, South Korea, Chile, Slovak Republic, and Iceland have raised tax rates in the last 10 years.  Former Vice-President Joe Biden would plan to

Defense spending is an integral part of the U.S. budget.  Since 1950, consumption and investment on national defense has increased from $20 billion to of $877 billion in 20Q2.  This represents a 5.5% compounded annualized growth rate over the last 70 years. While gross spending has increased over the long-term, it appears that the rate of increase is largest during a Republican Presidency.  Defense spending has substantially increased over the last two Republican terms (excluding current term), doubling during the 1980s and 2000s.  Conversely, defense spending has remained stagnant during the prior two Democrat campaigns. Exhibit 1 below highlights defense