Global investors are increasingly adjusting their portfolios in anticipation of significant market shifts driven by the prospect of Donald Trump reclaiming the US presidency next month, affirms the CEO of one of the world’s largest independent financial organizations.
deVere Group’s Nigel Green says: “The US dollar has surged to its highest level since August, fuelled by robust economic data and the rising likelihood, according to some polls, of a Trump victory in the upcoming November election.
“With expectations of a stronger dollar, higher inflation, and, therefore, fewer interest rate cuts, clients around the world are seizing the opportunity to strategically position their investments.”
The US dollar has rallied nearly 4% since late September, as investors weigh strong economic data against changing political dynamics. This upward momentum in the dollar is supported by positive US jobs figures and a resurgence of confidence in the American economy.
The data, signalling resilience in the labour market, has prompted investors to reconsider the likelihood of further rate cuts by the Federal Reserve in the near term.
“A stronger greenback presents opportunities for those holding dollar-denominated assets, as the currency’s rise boosts their purchasing power internationally. On the flip side, it also provides a call to reassess exposure to emerging markets and currencies that may be vulnerable to dollar strength,” notes the deVere CEO.
Donald Trump’s economic agenda, particularly his inclination toward protectionist policies, is expected to further impact market dynamics.
“His approach to imposing tariffs on imports has historically contributed to inflationary pressures. As the likelihood of a second Trump administration increases according to some polls, investors are preparing for a policy landscape that could drive inflation higher.
“Should Trump win in November, inflation is expected to rise as trade policies lead to higher import costs. This, in turn, could prompt the Fed to adopt a less aggressive approach to rate cuts, as the central bank would seek to balance inflation control with economic growth.”
He continues: “We’re seeing a global trend where investors are recalibrating their portfolios to capitalise on a strengthening dollar while preparing for the potential inflationary effects of Trump’s trade policies.
“Clients are increasingly favouring assets that stand to benefit from a stronger dollar and rising inflation, such as dollar-denominated bonds.
“Additionally, investments in commodities like gold, which historically serves as a hedge against inflation, are also becoming more attractive to investors looking for safe-haven assets during periods of policy uncertainty.”
Equity investors are re-evaluating their exposure to sectors that may be particularly sensitive to inflation and trade policy changes.
“For instance, industries reliant on imported goods may face rising input costs, while domestic sectors with less reliance on global supply chains would likely benefit from protectionist policies.”
Nigel Green concludes: “Global investors are being strategic rather than reactive as the likelihood of a second Trump presidency appears to be growing which, should it happen, could be expected to push the dollar and also inflation higher, meaning less rate cuts.”
Analysis by George Prior
