Article
The inauguration of Donald Trump as President in January 2025 marks the beginning of a new chapter in U.S. policy and governance. Financial markets, which thrive on stability but react sharply to political shifts, are poised for significant movements as the global economy adjusts to anticipated changes in fiscal, monetary, and geopolitical strategies. At De Pointe Research, we assess the implications for both traditional and alternative asset classes to provide a comprehensive outlook for investors.
Traditional Assets: Stocks and Bonds
Stocks:
Historically, Trump’s presidency has been associated with a pro-growth, business-friendly stance. His administration will likely focus on tax reforms, deregulation, and infrastructure spending. Sectors such as energy, defence, and industrials could see immediate benefits, while technology and green energy might face headwinds due to possible rollbacks of climate-focused policies.
The broader stock market could experience a relief rally if businesses anticipate reduced corporate taxes and a push for reshoring manufacturing. However, heightened geopolitical tensions or trade restrictions could create volatility, particularly for multinational corporations dependent on global supply chains.
Bonds:
On the fixed-income side, any significant fiscal stimulus under the new administration could lead to increased government borrowing, putting upward pressure on Treasury yields. This may negatively impact bond prices in the short term. However, if the Federal Reserve shifts toward a more dovish stance to counterbalance political pressures, it could temper the yield rise. Investors in fixed-income instruments should brace for potential yield curve steepening.
Currency Markets: The Dollar Dilemma
The U.S. dollar’s trajectory under a Trump presidency will likely hinge on trade and monetary policy. A return to protectionist rhetoric or tariffs could bolster the dollar in the short term as a safe-haven asset. However, sustained trade wars could weaken global confidence in the dollar as the dominant reserve currency.
Emerging market currencies, often inversely correlated with the dollar, could experience sell-offs. Safe-haven currencies like the Swiss franc and Japanese yen might see increased demand amid geopolitical uncertainty.
Alternative Assets: Gold, Art, and Cryptocurrency
Gold:
Gold has historically performed well during periods of political uncertainty and inflationary pressures. Gold could see significant inflows if Trump’s policies lead to higher inflation or geopolitical instability. For UK-based investors, the additional factor of exchange rate fluctuations may also amplify returns.
Central banks’ gold purchases have already reached record levels in recent years. With a potential weakening of global confidence in the dollar, gold could be an essential hedge for portfolios in 2025.
Art:
The global art market, which has shown resilience through various economic cycles, could continue to thrive under a Trump presidency. High-net-worth individuals often turn to tangible assets like art during times of uncertainty or as part of broader diversification strategies. Moreover, regions such as Asia and the Middle East are expanding their influence in the art world, offering opportunities for cross-border investment growth.
For investors in this space, De Pointe Research continues to identify and evaluate top-performing sectors, particularly contemporary and modern art.
Cryptocurrency:
Cryptocurrencies are likely to play a complex role in the evolving financial landscape. A Trump administration might adopt a sceptical view of decentralized finance, leading to increased scrutiny or regulation. However, such moves could validate the market’s growth by offering more explicit frameworks.
Bitcoin and Ethereum, as decentralized stores of value, may benefit from increased demand as investors look for hedges against potential dollar devaluation or government overreach. Conversely, stricter regulations could hinder smaller tokens or high-risk projects.
Investor Takeaways
- Diversification is Key: Whether you favour traditional or alternative assets, spreading your investments across uncorrelated markets will help navigate potential volatility.
- Monitor Policy Announcements: Early indicators of fiscal or trade policies will provide valuable clues for adjusting portfolios.
- Prioritize Tangibles: Gold and art continue to provide stability amid uncertainty, offering security and growth potential.
- Stay Agile in Crypto: Leverage positions in established cryptocurrencies while monitoring regulatory shifts.
The financial markets will enter a new adjustment phase as we look ahead to Trump’s inauguration and the following policies. While traditional markets may face turbulence, alternative asset classes like gold, art, and cryptocurrency provide promising hedging opportunities.
At De Pointe Research, we’re committed to guiding investors through these transformative times with insight-driven strategies tailored to the alternative investment landscape.
