According to data from Edison Research, as Donald Trump is set to take office in the White House, the US dollar and stock market are seen as winners, but a Republican presidential win may put pressure on bonds, emerging markets, clean energy, and sustainable investments.

Asset management company Mirabaud's senior investment expert John Plassard said in the report that Trump's return to the presidency is expected to boost the US market, but at the cost of tight monetary policy, tense geopolitical situation, and record deficits. The US priority policy will revitalize energy, national defense, and manufacturing, promoting domestic investment. However, this protectionist approach may lead to an increase in inflation, while tariffs will increase production costs. Due to tax cuts, the federal deficit may further expand, and geopolitical tensions may escalate.

The reasons are as follows.

Currency

Trump's election as president will drive the US dollar stronger, with investors expecting his policies to result in inflation and growth higher than during the administration of Democratic Kamala Harris. This means the Federal Reserve needs to maintain high interest rates to prevent the economy from overheating, which in turn will be bullish for the US dollar.

At the same time, Trump's plans to impose tariffs on trade, compel European allies to pay more for defense expenses, and show skepticism towards multilateral institutions may dampen economic growth in other parts of the world, enhancing the attractiveness of the US dollar. Citigroup analysts expect the US dollar to rise by 3% after a Trump victory.

Analysts predict that if subsequent tariffs and domestic tax cuts are implemented, the euro will plummet significantly, possibly breaking below the key $1 level.

They also anticipate that the Renminbi will further depreciate, much like it did from 2018 to 2020 when the Renminbi rapidly devalued.

The rise in dollar yields also means the return of arbitrage trading, with currencies such as the Japanese yen and Swiss franc being heavily sold off before the general election.

However, analysts believe that the Swiss franc will receive support, as the country's high-value export products can protect it from tariff impacts, and the currency often performs well during periods of rising inflation.

It is expected that the Trump administration will take a more moderate stance on regulating cryptocurrencies, with Bitcoin being another potential winner. On Wednesday, the world's largest cryptocurrency hit an all-time high.

Stocks

Trump has promised to reduce regulations and lower taxes for large corporations, increase oil production, and implement strict immigration policies, indicating stronger economic growth and inflation, which is seen as beneficial for the stock market. Banks, technology, defense, and fossil fuel industries may benefit.

Goldman Sachs estimates that Trump's plan to reduce the corporate tax rate from 21% to 15% will increase the returns of S&P 500 index component stocks by about 4%.

Even so, it is still unclear how much of Trump's tax reduction plan will be approved by Congress. Meanwhile, his protectionist policies and tough stance on China will raise costs, lower profitability, and damage multinational corporations.

Outside the United States, a strong dollar, rising U.S. interest rates, and trade tensions will mean that defensive industries will perform better, while multinational companies exposed to the U.S. market will be affected.

Industries affected by tariff changes, such as semiconductors, autos, and clean energy, may experience volatility. Investors have rushed to exit positions in Japanese stocks dominated by auto manufacturers and in European electric vehicle and chip stocks before the election results.

Barclays warns that if trade conflicts reignite, European corporate earnings may see a "high single-digit" percentage decline. Trump has stated his intention to end the war in Ukraine, but also indicated that European allies need to increase defense spending, leading to a potentially mixed outcome for European defense sectors.

Bonds

Investors are increasingly concerned about the scale of US government debt and rising fiscal deficits, fearing this could push up borrowing costs or bond yields.

It is estimated that Trump's spending plans could increase the deficit by $7.5 trillion over 10 years, far exceeding what Harris proposed. In October, US bond yields rose by nearly 50 basis points, with the market anticipating a higher chance of Trump's victory.

Inflationary pressures from Trump's policies will limit the Fed’s room to cut rates further, keeping US bond yields elevated.

A Trump victory could also suppress economic growth in Europe and Asia, as tariffs and other policies put pressure on these economies. The euro, yen, Swiss franc, and other currencies will face more pressure as inflation rises, reducing the room for central banks in these countries to cut rates when necessary. Analysts expect global yields to rise.

commodity equity index

Trump will maximize the drilling volume of oil and gas in the United States by expanding federal leasing and relaxing environmental regulations as much as possible - this policy agenda almost guarantees that the United States will continue to be the world's largest oil producer. Strong supplies may help keep the price of West Texas Intermediate crude oil futures relatively low, with the futures price down about 4% so far this year.

On the other hand, he may intensify the enforcement of sanctions on Iranian oil, which could reduce global crude oil supply. He also stated that he would fill the strategic oil reserve to unprecedented levels, which could provide support for prices when the government enters the market.

Soybeans have also become a focus of attention.

Emerging markets

Even before the election, concerns about Trump's policies have put pressure on emerging economies. Trump has stated that he will impose tariffs of up to 200% on Mexican car imports. Analysts say the Mexican peso could fall to over 21 against the US dollar, a level not seen in more than two years.

Another potential obstacle faced by emerging markets is: Trump's vice presidential candidate JD Vance proposed a 10% tax on remittances, which is significant for many Latin American economies.

If tariffs are increased, the South African rand, Brazilian real, and stock markets in these countries will be affected.

Selling of US government bonds and a rise in the US dollar will also draw funds away from emerging markets, forcing many countries to tighten their monetary policies.

Emerging economies with domestic growth and reform stories (such as India or South Africa) may benefit and become safe havens in the previously turbulent global environment. Copper and lithium-producing countries like Chile may largely escape unscathed, as their export products are less replaceable.

Sustainable investments

If Trump wins, he will be able to fulfill his campaign promises by lifting green regulations restricting oil and gas drilling and coal mining, potentially boosting the stock prices of these industries.

Trump also stated that he would 'rescind all unused funds' under the Inflation Reduction Act, a hallmark climate law of the Biden-Harris administration, which includes billions of dollars in subsidies for electric cars, solar, and wind energy.

In reality, a decline in the stock prices of these industries may require congressional action, with some Republican lawmakers at least showing support for certain measures.

Trump also vowed to dismiss the head of the U.S. Securities and Exchange Commission. This would weaken the ability of American sustainable funds to push for policy changes and could reduce the attractiveness of these funds. Since 2022, these funds have faced net withdrawals due to high energy prices undermining relative returns.

Wind power development

Market analyst Richard Valdmanis pointed out that after Trump's return to the White House, U.S. energy policy will refocus on maximizing oil and gas production rather than addressing climate change. However, a Republican victory is unlikely to significantly slow down the vigorous development of renewable energy in the USA. Biden signed the Inflation Reduction Act (IRA) in 2022, guaranteeing billions of dollars in solar and wind energy subsidies over the next decade. With the support of Republican states, it is almost impossible for this law to be repealed. Trump criticized the IRA as too expensive before the election and promised to cancel all unused funds allocated by the law. However, doing so would require legislators, including those in states benefiting from IRA-related investments such as solar panel factories, wind farms, and other projects, to vote to repeal. Carl Fleming, a partner at McDermott Will & Emery law firm, said: 'The employment and economic benefits in red states are so substantial, it is hard to see a government saying we don't like this.' At the same time, experts suggest that fossil fuel production in the USA may not change significantly under Trump's leadership.