Trump's victory pushes US shares to record highs

Key takeaways

An incoming 'America first' agenda saw investors filter the likely winners and losers following Donald Trump's emphatic victory. Domestically-focused companies rallied strongly at the expense of those trading overseas, while those in Europe and developing economies slumped on fears of a trade war.

Trump trades push US shares to all-time highs
Donald Trump’s decisive victory for the White House, and Republican wins in the Senate and likely the House of Representatives too, pushed major US indices to all-time highs. Returns were led by the technology-concentrated Nasdaq index, with the broader S&P 500 and Dow Jones Industrial achieving rises of over 4.5%. Investors believe the incoming Republican administration will loosen the regulatory framework and cut taxes, which will improve corporate earnings growth. The prospect of US tariffs potentially driving up the price of imports meant the benchmark US 10-year Treasury bond was little changed over the week, despite the interest rate cut by the US Federal Reserve (Fed).

The initial market winners and losers
Trump’s promotion of an ‘America first’ policy on trade and expectations for tax cuts meant investors adopted a positive approach to domestic shares at the expense of those in other major trading blocs, such as Europe and developing economies. In the US, share prices of large companies, which have significant business overseas, performed less well than those of small and mid-sized businesses, which will be much more reliant on domestic orders. Banks and traditional energy companies also rose, while renewables weakened on expectations that environmental policies will ease. The prospect of the US debt burden continuing to rise, and the likelihood that tariffs will increase domestic inflation, is likely to be a negative longer-term for the US dollar, although the initial pro-growth agenda is being viewed positively by investors.

Central banks carry on cutting
As anticipated, the Fed lowered US interest rates by 0.25%, to a range of 4.50%-4.75%, in response to slowing inflation. Signals from financial markets suggest the Fed will make one more 0.25% cut in December. Meanwhile, for only the second time since 2020, the Bank of England cut interest rates by 0.25% to 4.75%. Again, this was a widely expected move by investors, with multiple components of UK inflation such as services and wage growth easing. Unlike the Fed, the Bank of England was more cautious about the pace of future rate cuts.

Market moves

• For the third week running, European shares measured by the STOXX 600 index weakened.

• In China, the Shanghai Composite Index rose 5.5% over the week in response to a fresh government stimulus initiative, despite some disappointment on specifics to improve the housing market and fears of possible US tariffs.

• The US dollar strengthened for the sixth consecutive week versus a basket of other major currencies.

What to look out for this week

• On Wednesday, US consumer price inflation (CPI) for October will be released. Compared with a year ago, this is forecast to rise 2.3%.

• On Thursday, UK economic growth (GDP) for Q3 will be released. General expectations are for 0.3% growth compared with the previous quarter and 0.6% higher than a year ago.

• Also on Thursday, the latest US initial jobless claims (workers applying for unemployment benefits for the first time) will be reported.

• On Friday, Chinese industrial production data for October will be released.

Important Information

Handelsbanken Wealth & Asset Management Limited is authorised and regulated by the Financial Conduct Authority (FCA) in the conduct of investment and protection business, and is a wholly-owned subsidiary of Handelsbanken plc. For further information on our investment services go to wealthandasset.handelsbanken.co.uk/important-information. Tax advice which does not contain any investment element is not regulated by the FCA. Professional advice should be taken before any course of action is pursued.

• Find out more about our services by contacting us on 01892 701803 or exploring the rest of our website: wealthandasset.handelsbanken.co.uk
• Read about how our investment services are regulated, and other important information: wealthandasset.handelsbanken.co.uk/important-information
• Learn more about wealth and investment concepts in our Learning Zone: wealthandasset.handelsbanken.co.uk/learning-zone/
• Understand more about the language and terminology used in the financial services industry and our own publications through our Glossary of Terms: wealthandasset.handelsbanken.co.uk/glossary-of-terms/

All commentary and data is valid, to the best of our knowledge, at the time of publication. This document is not intended to be a definitive analysis of financial or other markets and does not constitute any recommendation to buy, sell or otherwise trade in any of the investments mentioned. The value of any investment and income from it is not guaranteed and can fall as well as rise, so your capital is at risk.

We manage our investment strategies in accordance with pre-defined risk objectives, which vary depending on the strategy’s risk profile.

Portfolios may include individual investments in structured products, foreign currencies and funds (including funds not regulated by the FCA) which may individually have a relatively high risk profile. The portfolios may specifically include hedge funds, property funds, private equity funds and other funds which may have limited liquidity. Changes in exchange rates between currencies can cause investments of income to go down or up.

This document has been issued by Handelsbanken Wealth & Asset Management Limited. For Handelsbanken Multi Asset Funds, the Authorised Corporate Director is Handelsbanken ACD Limited, which is a wholly-owned subsidiary of Handelsbanken Wealth & Asset Management, and is authorised and regulated by the Financial Conduct Authority (FCA). The Registrar and Depositary is The Bank of New York Mellon (International) Limited, which is authorised by the Prudential Regulation Authority and regulated by the FCA. The Investment Manager is Handelsbanken Wealth & Asset Management Limited, which is authorised and regulated by
the FCA.

Before investing in a Handelsbanken Multi Asset Fund you should read the Key Investor Information Document (KIID) as it contains important information regarding the fund including charges and specific risk warnings. The Prospectus, Key Investor Information Document, current prices and latest report and accounts are available from the following webpage: wealthandasset.handelsbanken.co.uk/fund-information/fund-information/, or you can request these from Handelsbanken Wealth & Asset Management Limited or Handelsbanken ACD Limited: 77 Mount Ephraim, Tunbridge Wells, Kent, TN4 8BS or by telephone on
+44 01892 701803.

Registered Head Office: No.1 Kingsway, London WC2B 6AN. Registered in England No: 4132340