It was Treasury Secretary John Connally who famously quipped in the 1970s that the US dollar was “our currency, but your problem”. Today, investors around the world could just as easily replace “currency” with “interest rate”, “stock market” or “geopolitical strategy”. Donald Trump’s win changes all of these, and more.
With US stocks making up over two-thirds of global markets, the impact of a second Trump term on equity portfolios is hard to avoid. While UK investors’ direct equity holdings may skew domestic, most pension holdings are invested globally, and most of these end up in US stocks.
If Trump succeeds in imposing a universal 20 per cent tariff on all imports and raising the tariff on imports from China to 60 per cent we can expect interest rates to be higher for longer
Last time Trump was elected US stocks rallied. Much of this was simple maths. Trump campaigned in 2016 on a pledge to slash the corporate tax rate from 35 per cent to 15 per cent. His surprise victory saw stocks reprice to capture the earnings kicker, even if he managed only to cut the rate to 21 per cent.