At a glance

• President Trump has been re-elected, and while the final count is not quite over yet, it appears that Republicans will control the White House, Senate, and House of Representatives – a so-called Red Sweep.  

• The Red Sweep means President Trump will likely be able to enact policies without the obstacle of opposition from lawmakers in Congress, at least until the US midterms in 2026. This includes the potential for unfunded tax cuts or increased spending.

• Markets have been less volatile than perhaps feared. Equity markets are comfortable with a Trump presidency and while the dust settles on Congress, the bond market is digesting the potential of increased funding requirements.

• This election has been amongst the most polarising in recent American history, and while many will be waking up to a divisive political outcome, global financial markets are likely to take the news in stride and benefit from renewed certainty.

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A Red Sweep is on the cards

With Pennsylvania and Georgia coming out in favour of the Republican nominee, Donald Trump will become president for the second time.

After many twists in the race, with an assassination attempt and an incumbent Presidential nominee withdrawing from the campaign trail, this was a particularly unusual run-up period to an election, even for the US.  

We look forward to some much-needed reduction in market uncertainty. But, crucially for investors, Congress’s make-up, with Republicans controlling the Senate (the upper chamber) and the House of Representatives (the lower chamber), there’s the potential for a larger policy shift than previously thought.

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What does this mean for markets?

We expect a Trump victory will broadly support equity markets, in particular in the US. But with a Red Sweep now likely, the additional fiscal loosening (lower taxes for individuals and corporations) would concern the Treasury market about even greater funding needs.  

This fiscal loosening is likely to boost growth, slowing the decline of inflation, and may place pressure on the Federal Reserve to keep rates higher for longer. This, in turn, would support the US Dollar.  

Furthermore, higher trade tariffs remain a favoured Trump policy, which are also likely to cause inflation to rise. Perhaps even more importantly, such a policy would be likely to increase trade frictions between the US and the rest of the world.  

It’s worth noting that the prior Trump Presidency started with headline negotiating positions, which typically moderated over time. There is likely to be less aggressive support for clean energy, and a more relaxed approach to fossil fuel regulation ahead.

Some financial sector deregulation is likely, but most notably we’d look for a more positive attitude towards cryptocurrencies, which both President Trump and Vice President Vance have spoken about favourably.  

There is potential for a boost to US stocks, in particular smaller companies (small caps), compared to shares in companies from other markets, but much of this appears to be priced in.

Finally, we’d look for continued regulatory scrutiny of US Big Tech, but this is well accounted for in the markets, and these firms are considerably well funded to defend themselves.  

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The Cadro view

Political regime change’s impact on financial markets can often be overestimated, particularly during periods of intense political intrigue in the media. This result does not dramatically alter the near-term economic outlook, which points to a soft-landing, with easing inflation and a cooling labour market.

The US will remain tough on China and, particularly when it comes to trade relations, Technology and AI will remain vital and attractive sectors for investors seeking real revenue growth. We would also look for growth in the US to have some upside potential within portfolios, but this may be capped by higher interest rates.  

We believe it is important to look ahead to 2025 as major central banks (excluding the Bank of Japan) continue their rate cutting cycles, although this might be moderated somewhat in the US.