Trump Victory – Our 10 Key-takeaways
Article from Beat Wittmann, Chief Investment Strategist @ Key Family Partners
Trumps Wins a Clear Mandate
Trump has won a clear mandate based on radical nationalism, deportation of immigrants and boosting the domestic US economy. There is no doubt what this is all about and there won’t be any excuses.
Trump’s economic program is focused on instant gratifications and his zero-sum game mentality program – if fully implemented – would yield devastating economic consequences. However, campaigning is not governing and it remains to be seen what Trump will be up to once in the Oval Office.
America Comes First
Trump and America come first and Trump will judge and manage all foreign relationships by their respective trade surpluses with the US and political allies by the extent of their defense spending contributions.
Trump has no friends and deals with enemies and alliance partners alike in a transactional and utilitarian way, and certainly not with respect and via existing contracts, established rules and multilateral institutions.
Hiring and Firing Cabinet Members
It will be key to watch Trump’s first cabinet nominations for names, competence, contributions and longevity. However, Trump will hire and fire cabinet members at will, just as he did during his first term.
Trump’s White House aims also to deliver entertainment, just as the election campaign did, and many people wish to be entertained. Think of the Romans’ ‘panem et circenses’ – nothing new under the sun, just less classic.
Expect Surprises, Disruption and Collateral Damages
Trump will to full extent use the US unique power and leading position in finance, technology, energy and defense to pursue his objectives. This means frictions with both superpowers China and the EU and collateral damage for medium sized and small nations.
Anyone in the world who naively thinks there is a moral right to political and behavioral reciprocity will learn the hard and fast way what the difference is between a rule-maker and a rule-taker.
China – the Number One Rival
For the US China remains the number one geopolitical rival and the US won’t accept China’s trade surplus and neither will Europe. And it remains completely unacceptable from a European perspective that China, North Korea and Iran support Russia in its war against the European security order.
We expect a significant increase in geopolitical confrontation between the US and China and China itself remains on a negative domestic economic trajectory.
Trump Loathes the EU and NATO
Trump loathes the EU and NATO openly and just like dictators Putin and Xi Jinping Trump will try everything to divide and rule the EU and threaten European NATO partners.
The only effective way to deal with Trump is that the EU would hit back at the US regarding any hostile and unfair actions. Fortunately, the new and more unified and forceful EU leadership under Ursula von der Leyen is ready to cooperate or to retaliate.
Regarding collective European defense facing Russian military aggression all European countries would be well advised to pre-emptively move defense spending from 2% of GDP up to 3% and overcome the fragmentation in the European defense industry. Furthermore, if Trump goes extreme and pulls out of NATO and Europe nuclear latency will become an urgent topic.
It is the Capital Markets, Stupid!
Trump will keep watching capital market prices around the clock. It is key to understand that Trump will do whatever it takes that US equity prices perform well – and tax cuts and deregulation just achieve that.
Trump has only one master and that is the capital market. So it remains key to watch risk assets prices, most importantly USD and Treasuries, as leading indicators to Trump’s policy actions.
FED Policy – Focus on Independence and Dual Mandate
Trump loves low interest rates (and debt) and has the bad and damaging habit to attack FED governors. Expect the FED to religiously stick to its dual mandate and preserve its independence.
Crucially, capital markets won’t like to see POTUS to meddle in monetary policy matters. And if Trump would engage in reckless fiscal policies the FED would re-act to it.
US Financials Reign Supreme
The US is by a wide and unassailable margin the world’s dominating and best performing financial sector, capital market and with the USD also currency. Trump’s election is a further boost to US financials’ performance – this through higher-for-longer interest rates, deregulation and increased deal-making leading to accelerated top and bottom line growth.
As a result, the European financial sector will remain even more underperforming and undervalued, unless the EU will finally complete the long overdue capital market and banking union – it would be about time that Brussels and Frankfurt prevail over the protectionist national capitals.
Equities – The Asset Class of Choice
We reinforce our conviction that equities remain the asset class of choice. Our favorites for 2025 include, geographically speaking, the US, Europe and ASEAN and from a thematic point of view technology, infrastructure, industry and aerospace & defense – and the latter sector particularly in Europe.
