Donald Trump’s return to the White House for his second term has sparked big conversations among economists and investors. They’re calling it “Trumponomics 2.0,” and it’s expected to impact everything from stock prices to commodity costs and cryptocurrencies.
Let’s break down what Trump’s re-election could mean for the world’s markets and what investors should watch out for.
Stock Market
Trump’s promise of lower taxes and less regulation has brought optimism to Wall Street. Companies in banking, technology, defense, and fossil fuels are already seeing their stock prices go up, as investors are hopeful about higher profits. Goldman Sachs even projects a 4% boost in earnings for big U.S. companies if corporate tax rates drop from 21% to 15%.
But it’s not that simple. Companies that depend on global supply chains, like car manufacturers and chemical producers, could face big problems. Higher tariffs could push up their costs, which might mean smaller profits and lower stock prices. They could try to pass those higher costs to consumers, but that could lead to higher inflation. Emmanuel Cau from Barclays points out that some European companies may see major hits to their profits if trade with the U.S. becomes more expensive. This is a reminder that while some will gain, others could lose out in this new phase of Trumponomics.
Currency Market
The U.S. dollar is likely to get stronger under Trump’s policies. Investors expect higher growth and inflation, which means the Federal Reserve may keep interest rates high to manage that growth. Citi analysts predict the dollar could go up by 3% after Trump’s win.
Other major currencies, though, could feel the strain. Analysts think the euro might fall below the $1 mark if new tariffs and tax cuts are put in place. China’s yuan could also drop, as it did during Trump’s first term from 2018 to 2020. But the Swiss franc might stay strong due to Switzerland’s high-value exports, which are more protected from tariffs.
Cryptocurrency Market
Cryptocurrency seems to be a big winner following Trump’s re-election. Bitcoin has hit a record high, reaching $89,000 on November 12, 2024. Other major cryptocurrencies, like Ethereum and Dogecoin, also saw strong gains. This excitement comes from Trump’s unexpected support for crypto in 2024. This is a huge shift from 2019, when Trump criticized cryptocurrencies and highlighted their risks.
At a Bitcoin event in Nashville, Trump talked about his goal for the U.S. to become the “crypto capital of the planet.” He also said he would create a “Bitcoin and crypto presidential advisory council” and stop the Federal Reserve from making its own digital currency. These plans point to a more relaxed regulatory environment, which crypto fans love.
However, not everything is straightforward. Trump’s new business, World Liberty Financial, is a crypto lending platform, which raises some ethical questions. Could his power as President impact the rules in a way that benefits his own interests? Some experts think so, and it’s something to keep an eye on.
Commodities Market
Trump’s energy plan includes expanding oil and gas production by making more federal land available for drilling and loosening environmental regulations. This could keep U.S. oil production high and prices stable. But Trump also promised to be tougher on oil sanctions against Iran, which might limit global supply and push prices up. Plus, he has talked about filling the U.S. Strategic Petroleum Reserve, which could affect oil prices.
On the agriculture side, things are less certain. Trade between the U.S. and China could get tense again. U.S. farmers, especially those selling soybeans, are already feeling the pinch, with soybean prices down 25% from last year. If tensions rise, it could become even harder for them to sell their crops abroad.
Emerging Markets
Emerging markets often feel the impact of U.S. policy shifts the most. During Trump’s first term, tariffs on Chinese goods and a possible 200% tariff on Mexican car imports created challenges for these countries. Analysts think the Mexican peso could drop below 21 to the dollar, a level not seen in over two years. Trump’s vice president, JD Vance, also suggested a 10% tax on remittances, which could hit Latin American economies hard.
But it’s not all bad news. Countries with strong local growth stories, like India and South Africa, might become more attractive to investors looking for safer bets in a volatile world. Chile, a major producer of copper and lithium, could also stay stable, thanks to its unique exports that are not easy to replace.
Final Thoughts
Trump’s second term promises significant change for global markets. The stock market in the U.S. could see new highs with tax cuts and reduced regulation, while international companies dealing with trade tariffs might struggle. The dollar is expected to stay strong, putting pressure on the euro and yuan. Commodities like oil and soybeans could see varied effects, and the cryptocurrency market is set for a potential boom under Trump’s policies.
Trumponomics 2.0 is shaping up to be a time of big wins and tough challenges. Investors, traders, and market watchers should be prepared for surprises, both good and bad, as Trump’s policies start to unfold.