Markets hoped for a Democratic White House and a Republican Congress. This scenario would have resulted in at least a year, if not more, of prolonged hostility. Instead, the clearness of the Republican victory concedes huge political capital to Trump and transfers the debate within the Republican Party, between Trump - advocate of an expansive fiscal policy - and many of his party mates who, in Congress, support a line of greater austerity. In any case, a compromise will be found.
Among the themes shared by Congress and the White House there will certainly be corporate tax reform (which has been needed in the United States for at least 10 years and which will see a general lowering of corporate tax rates); a measure to encourage the return of capital that companies legally hold abroad, to encourage investment in the US; it's a lowering of the tax burden also on natural persons.
These measures should favor the stock market, especially the sectors interested in infrastructure, the sector pharmaceuticals – on which instead the Democrats pressed to introduce a political price control – and the industry military. In general, the new economic policy line should produce an increase in US growth by a few decimal points, probably not the 3% Trump talked about.
The other side of the coin concerns the rise in inflation which presumably will arrive in the coming months – moderate but still perceptible – and will certainly induce the Fed to raise rates in December, then once or twice over the next year. The bond markets, especially in America but also in the rest of the world, had not discounted this scenario, therefore a correction, even if not dramatic, will be inevitable. There will be a little bear market creeping into the long end of the bond curve.
At an operational level, as far as can be understood from now on, in the coming months the investment component to be favored in relative terms remains the shareholder, to be bought on weakness (even if prices in general are high, nothing points to a recession in the near future), and instead sell long bonds on strength.
As regards the corporate bonds, these are hybrids between stocks and bonds, so they will benefit from the improving economic climate, but will be penalized by the increase in rates.
On the side of raw material, you need to pay close attention to the Petroleum. Trump will deregulate the whole sector, also giving the possibility to the carbon to resume its place among the sources of energy. Then the world will be flooded with American production, because the United States is rich in all existing energy sources. As a result, there will be downward pressure on energy commodity prices, but oil sector equities will not be particularly affected by this, as deregulation and tax cuts will offset the decline in prices.
Sul dollarFinally, I would keep a cautious profile. Trump's policies, in theory, should favor an appreciation of the American currency, but it is always possible that the new President - in renegotiating trade treaties with the rest of the world - will use the dollar as a weapon of pressure, under certain circumstances threatening to weaken it . So I would keep investments in this area covered.
