Republican candidate Donald Trump is projected to be the 47th president of the United States, and Republicans are projected to control the Senate.
We focus on coming changes in fiscal policy, trade, immigration, energy and regulation – and stay overweight U.S. stocks.
A Trump administration will look to extend the expiring provisions of the Tax Cuts and Jobs Act, but control of Congress is key. Republicans are also likely to propose new tax cuts, potentially including to corporate taxes.
The Trump administration will take a very different approach on foreign policy. Trade will be front and center. Trump has proposed a wide range of tariffs, including 60% tariffs on China and 10-20% broad tariffs. Implementation is uncertain, but if enacted, such policies could reinforce geopolitical and economic fragmentation, which is a structural force we see keeping inflation higher in the medium term.
A reduction in legal immigration could impact the labor market.
Trump’s win likely means some deregulation, including the rolling back of regulations for banking. Big tech may remain a bipartisan antitrust focus.
We see Republicans aiming to boost energy production, though U.S. production is already at record levels and ramping up production takes time.
A Trump administration could look to scale back elements of the Inflation Reduction Act, like electric vehicle credits – though full repeal seems unlikely.
In the near term, the election results reinforce our preference for U.S. stocks over Europe.
We see U.S. equities supported by solid economic growth, strong corporate earnings growth and Federal Reserve interest rate cuts.
Longer term, much depends on how Trump’s agenda is enacted. We think de-regulation could benefit the energy, financial and tech sectors.
We are neutral long-term U.S. Treasuries, preferring medium-term bonds and some quality credit for income. But we expect yields to rise over time as investors demand more compensation for the risk of holding bonds.
Closing frame: Read details: blackrock.com/weekly-commentary
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