Global equity markets prepare for Trump 2.0, with investors anticipating increased tariffs under Donald Trump, the incoming 47th US President. His focus on higher tariffs raises concerns of a trade war with China, impacting S&P 500 companies significantly due to their reliance on imports. A projected 10% tariff could lower S&P 500 earnings by 3-5%, with Latin America, Europe (excluding the UK), and North Asia being most vulnerable. While US sectors like materials and autos may benefit, consumer sectors could face price impacts between -6% and -8%. In contrast, 95% of analysts believe Indian stocks will remain unaffected by such tariffs.
Financial institutions forecast a stable macroeconomic outlook despite uncertainties in Trump’s economic policies. The Federal Reserve is expected to maintain the federal funds target rate at 4.5% through 2025. The contradictions inherent in Trump’s agenda might lead to inflationary pressures, prompting concerns about tariffs and immigration policies.
Additionally, institutional investors are urged to consider cryptocurrency, particularly as the Trump administration appears supportive of Bitcoin’s mainstream adoption. Chinese exporters could encounter challenges due to tariff-related developments, while the return of Trump presents an opportunity for them to establish production in the US. Nomura predicts that tariffs will gradually be imposed throughout 2025, exerting upward inflationary pressure in the second quarter and beyond.