2024 US Election Results: How Trump’s presidency will impact global markets, FPI outflows – Times of India

With Donald Trump returning to the White House, the US dollar and stock market are expected to benefit, while bonds, emerging markets, clean energy, sustainable investments, and global equities may face pressures under a Republican presidency.
Many believe that a second Trump presidency could negatively impact Asia as a whole. However, for India, Trump’s election win is seen as favorable.
This scenario would require the Federal Reserve to maintain elevated interest rates to control economic expansion, benefiting the dollar.
Impact interest rate: The Federal Reserve is expected to maintain alignment with US government policies, though speculation suggests lower rates under a potential Trump administration.
US bond yields are anticipated to increase, potentially impacting the Federal Reserve’s interest rate reduction strategy.
Market performance analysis: Both US and Indian markets showed positive movement, reflecting the perception that Trump’s anti-China and pro-Russia positioning could benefit India more than a Harris administration.
Despite this optimism, trade and tariff concerns persist. India’s potential advantages include developments in iCET, the GE-HAL Engine collaboration, and reduced supply chain dependence on China.
FII investments: A Trump victory could strengthen the US dollar and enhance US asset attractiveness, possibly leading to some foreign portfolio outflows from India.
However, India’s strategic importance in countering China through Quad may attract increased Foreign Direct Investment in manufacturing, defence technology, and Global Capability Centres. The trend suggests a shift towards FDI rather than FII investments in the medium term.
Domestic growth potential: Countries with domestic growth potential and reform agendas, such as India or South Africa, might become stable options amidst global volatility. Chile’s copper and lithium exports could remain relatively unaffected due to their essential nature.
Depreciation of China’s yuan: Financial experts predict the euro could fall below $1 if tariffs and domestic tax reductions are implemented. They also anticipate further depreciation of China’s yuan, similar to the decline observed during 2018-2020.
Increased dollar yields are expected to revive carry-trades, with the Japanese yen and Swiss franc experiencing significant selling before the election.
Bitcoin could benefit from a Trump administration’s more lenient approach to cryptocurrency regulation. The primary cryptocurrency reached unprecedented heights on Wednesday.
Tax reduction plans: Goldman Sachs calculates that reducing corporate tax rates from 21per cent to 15per cent would enhance S&P 500 earnings by approximately 4%.
However, uncertainty remains regarding congressional approval of Trump’s tax reduction plans. Additionally, his protectionist policies and firm stance towards China could increase costs, reduce profits, and affect multinational corporations.
Fossil fuel sectors are expected to benefit: Trump’s agenda of reduced corporate regulation, lower taxes, expanded oil production, and strict immigration controls suggests increased growth and inflation, generally favourable for equities. Banks, technology, defence, and fossil fuel sectors are expected to benefit.
Renewable energy likely to experience volatility: Sectors vulnerable to tariff adjustments, including semiconductors, automobiles, and renewable energy, are likely to experience volatility. Investors anticipating election results have reduced positions in Japanese stocks, particularly automakers, and European electric vehicle and semiconductor shares.
Trump’s policy implications have already impacted emerging economies. Beyond Chinese tariffs, he proposes up to 200per cent tariffs on Mexican vehicle imports. Analysts suggest Mexico’s peso could depreciate beyond 21 per dollar, reaching two-year lows.
Iranian oil sanctions: Conversely, heightened enforcement of Iranian oil sanctions could reduce global crude availability. Additionally, his pledge to unprecedented Strategic Petroleum Reserve levels could boost prices through government market participation.
Trump’s administration would prioritise maximising US petroleum production through expanded federal leasing and reduced environmental regulations, securing America’s position as the leading petroleum producer. This substantial supply could maintain relatively low prices for US West Texas Intermediate crude futures, which declined approximately 4per cent this year.
A Trump victory would enable implementation of promised environmental regulation rollbacks affecting oil, gas and coal industries, potentially benefiting these sectors’ shares.