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Donald Trump’s presidency may prove to be a good thing for global stock markets and smaller companies in particular, analysts have suggested, though investors should brace themselves for some jolts and volatility over the next four years. The UK’s benchmark FTSE 100 index has been buoyed in recent sessions by a sense of renewed investor enthusiasm, while the Bitcoin cryptocurrency touched fresh highs ahead of Trump’s inauguration after the incoming President and First Lady both launched their own digital meme coins last week. Set against that, there are concerns over the potential impact of trade tariffs and protectionist policies on inflation and interest rates in the months ahead. The FTSE 100 made some modest ground in Monday trading ahead of the inauguration event in Washington DC, which was taking place after the London market closed. Last week saw the Footsie rally to all-time highs. Richard Hunter, head of markets at investment platform Interactive Investor, described the inauguration as a “defining moment” though US markets were closed on Monday for the annual Martin Luther King Day. He said the slew of executive orders announced within hours of Trump taking oath would set up an “interesting start” to trading on Tuesday. “Particular attention will be given to some of the measures promised during the election campaign, such as the potentially inflationary effects of tax cuts and tariffs in a show of American exceptionalism,” noted Hunter. “The so-called ‘Trump trades’, which have ranged across the likes of the financials and smaller cap stocks, could be in sharp focus. In the meantime, softer inflation releases at both the consumer and producer levels provided some solace for stocks, as the possibility of interest rate cuts this year came back to the table.” Nigel Green, chief executive of financial advisory and asset management outfit deVere Group, said Trump’s return to the White House as the 47th president was set to bring “seismic shifts” to financial markets, as his agenda unfolds with consequences for growth, inflation and investor strategy. He noted that with scores of executive orders ready for signing on his first day in office, the newly re-elected president would launch initiatives targeting trade tariffs, deregulation and defence spending, which are likely to “jolt markets and shape investor expectations” over the coming months and years. “The next six months will be marked by uncertainty, with the interplay of protectionist policies, deregulation and inflationary pressures dictating market moves,” Green added. “With Trump’s economic vision underway, investors must prepare for a fast-changing landscape in the world’s largest economy.” Victoria Hasler, head of fund research at investment group Hargreaves Lansdown, said a new President would bring new policies to analyse and factors to consider, but also provide “some certainty”. US smaller companies could benefit from Trump’s MAGA - “Make America Great Again” - stance, she added. “The lead up to Trump’s presidency has been noisy and, at times, divisive,” said Hasler. “Markets hate uncertainty though, and the simple fact of having the new president settled in the White House may prove to be a good thing for markets. “Over the next few weeks and months, we (and the rest of the world) will be watching closely, listening to the speeches and analysing the policies. No doubt some will have a more positive impact on markets than others - expect some fireworks and associated volatility as we navigate the next four years,” she added. “During campaigning, and since the election, we heard a lot about tariffs. We expect the reality to be a little more muted than the campaign chat, but nonetheless at least some new tariffs are likely, particularly when it comes to Chinese trade. “At the same time, we have the supportive backdrop of monetary policy easing. While we don’t expect interest rates to fall as quickly as originally anticipated, they are almost certainly on a downward trajectory. Historically, small companies have tended to perform well relative to their larger counterparts in a falling interest rate environment, which further strengthens the outlook for smaller companies.” Russ Mould, investment director at AJ Bell, said Trump was likely to have a much greater influence on markets than his predecessor Joe Biden due to his “punchier policies and unpredictable nature”. He added: “Investors should strap themselves in, as this situation implies much greater swings up and down for share prices, currencies and other asset classes. Pending more information on how Trump plans to achieve policy goals, certain investors have focused on the here and now, and that’s a world in which the new president embraces cryptocurrencies. Bitcoin has gone bananas after Trump launched his own cryptocurrency on Friday. It’s got crypto fans fired up in hope that digital currencies will go mainstream.” The clamour for cryptocurrencies has been described by one observer as a “digital gold rush”, with many anticipating a more crypto-friendly regulatory environment under the new administration. Gabriel McKeown, head of macroeconomics at Sad Rabbit Investments, added: “The whole cryptocurrency market continues to show unbridled enthusiasm. The potential for crypto policy changes to be perceived as catering to the Trump team’s self-interest and profit-seeking could overshadow genuine regulatory considerations. Whether this will prove to be a fleeting trend or a lasting symbol of a new financial-political paradigm remains to be seen. However, significant regulatory changes are all but guaranteed in the months ahead.” Friday saw the FTSE 100 index close at 8,505.69, breaking the record set last May. A weakened pound has lifted the fortunes of many top-flight companies that are not based in the UK, as their sterling-priced shares are cheaper to buy for people using other currencies, such as the dollar.
