Donald Trump Is US President (Again). Here Are 5 Things That Singapore Investors Should Take Note Of

One of the world’s most closely watched events, the U.S. Presidential election, took place on Tuesday, November 5. Leading up to the election, nearly all observers agreed that it was too close to predict. In the end, former President and Republican candidate Donald Trump defeated Kamala Harris, a Democrat, to claim victory.

Given the interconnectedness of global markets, U.S. political developments can have significant ripple effects on Singapore’s economy, impacting everything from trade relations to currency strength.

Now that the election dust is beginning to settle, here are five things Singapore investors should take note of as the world prepares for Trump’s second term in office.

#1 US Stocks React Positively

First and foremost, financial markets worldwide had anticipated a Trump victory in the U.S. presidential election. Most major institutions went “long” on U.S. stocks leading up to November 5, and this strategy appears to have paid off. The S&P 500 Index had already gained over 20% this year before the election and has risen about 4% this week alone.

The main reason markets have responded positively to a second Trump presidency is Wall Street’s view that Trump is more “pro-market” than Vice President Harris. Republicans are traditionally seen as more supportive of the stock market and corporations, especially regarding regulation. Trump’s campaign promises of further corporate tax cuts, should he be re-elected, fuelled short-term optimism around increased earnings for U.S. companies.

Trump’s 2017 Tax Cuts and Jobs Act (TCJA) introduced substantial tax cuts, most notably reducing the corporate tax rate from 35% to a flat 21%. While many of these cuts are set to expire in 2025, Trump’s upcoming term could see these measures extended or even expanded, potentially further boosting corporate earnings.

#2 The USD Strengthens

One of the first assets to respond to Trump’s anticipated victory was the U.S. Dollar (USD). Investors had already gauged market sentiment based on polling data for each candidate. On Monday, November 4, when positive polling data for Harris emerged, the USD fell.

Broadly speaking, markets viewed a Trump victory as a catalyst for a stronger USD. This reaction stemmed primarily from Trump’s proposed trade tariffs and corporate tax rate cuts, which were expected to be more inflationary than Harris’s policies.

With a more inflationary environment likely under Trump, the U.S. Federal Reserve would face increased pressure to maintain or even raise interest rates, reducing its flexibility to cut them. This outlook for potentially tighter monetary policy supports a stronger dollar relative to other currencies. This played out on election night as well, with the USD experiencing its biggest one-day gain against other major currencies since 2020.

Read Also: 10 Most Traded Currencies in The World, And Why They Are So Popular

#3 Bitcoin Gets A Boost

In the lead-up to the election, both Donald Trump and Kamala Harris sought to attract cryptocurrency enthusiasts. However, many in the crypto community perceived Trump as more supportive of the sector. This sentiment was reflected in Bitcoin’s performance; as news of Trump’s victory emerged, Bitcoin surged 10% for the week, reaching a new all-time high.

Trump also announced the launch of a cryptocurrency exchange named World Liberty Financial, which plans to introduce its own stablecoin, WLFI. The association of the new President with this venture has been advantageous for the company. The broader crypto industry views Trump’s involvement with World Liberty Financial as an indicator of favourable regulatory policies once he assumes office again.

#4 Bond Yields Rise

One asset that didn’t receive a boost from Trump’s election victory was bonds. In fact, U.S. 10-Year Treasury bond yields surged as news broke of his impending win.

It’s essential to remember that bond yields and bond prices move inversely—when yields go up, prices fall, and vice versa. Investors should be aware that Trump’s proposed higher tariffs and deeper tax cuts, similar to the impact on the U.S. dollar, could limit the Federal Reserve’s ability to lower rates if inflation increases.

With a tighter monetary policy likely on the horizon, bonds are responding to the prospect of “higher for longer” interest rates. Additionally, Trump’s extensive spending and tax plans could lead to a wider fiscal deficit, which may keep bond yields elevated until the medium-term implications of his policies become clearer.

#5 Potential Reversal Of Policies & Increased Uncertainty

Beyond considering the short-term effects of a second Trump presidency, investors should also consider which U.S. sectors might face increased pressure in the medium to long term.

For instance, on Wednesday, many U.S.-listed renewable energy stocks took a hit as investors worried that President Trump—an outspoken supporter of fossil fuels—could negatively impact the sector’s growth.

Under President Biden, the Inflation Reduction Act (IRA) provided substantial subsidies for renewable energy companies. While it’s uncertain whether a Trump administration would repeal the IRA, the act has notably benefited many Republican-leaning states, which might reduce the likelihood of its removal. Nevertheless, a less supportive political climate is broadly viewed as challenging for the renewable energy sector.

In addition, a second Trump term could bring heightened uncertainty due to his unorthodox approach to governance. This scenario may continue to benefit “safe haven” assets like gold, which recently reached record highs due to geopolitical tensions and strong central bank demand.

Read Also: From Money To Investment: Understand The History Of Gold, And Why It Remains A Valuable Commodity In Modern Finance

Want to learn more about investing? To kickstart your investment journey, DollarsAndSense is excited to host the first #EveryDayInvestor night on Wednesday, 13 November, at 7 pm at the SGX Centre. Join us as we dive into what it truly means to be an #EveryDayInvestor in Singapore. Learn how to start your investment journey, achieve financial success and make investing a regular part of your life.

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