In emailed commentary, Federated Hermes’ CIOs weighed in on the outcome of the US election for global equities, global liquidity markets, and global fixed income.
Stephen Auth, CIO for Global Equities, said: “Confounding the experts, President Trump handily won the Presidential election late on election night. Along with this, he solidly flipped the Senate; the only branch of government undecided as of this moment is the House, which will be important to how aggressively Trump can implement his agenda.
“History tells us that the best course for investors is to remain in the market rather than time it based on party affiliation. This said, the outcome from last night likely will impact which sectors do best. Trump’s growth agenda—lower taxes, deregulation, increased inbound U.S. investment via tariff negotiations—is a wind at the back of the Old Economy and supports the other forces already favoring these sectors of the market. The market’s initial reaction certainly appears to agree with us.”
Deborah Cunningham, CIO for Global Liquidity Markets, said: “Trump’s economic agenda could be inflationary, but money markets are already turning their attention to the Fed meeting. In the short term, Trump’s victory means less to the money markets than to other asset classes, although we have seen a modest backup in yields this morning. In the long-term, however, we are concerned that some of his economic policies, particularly tax cuts, higher spending and tariffs, could be inflationary and increase the national debt. Also, increased regulations on banks could affect supply.
“For now, we are looking past the election to the Federal Reserve’s meeting that concludes tomorrow. We agree with the futures market in expecting a 25 basis-point cut. This near-certainty, and the fact this meeting does not include economic projections, means the focus will be squarely on Powell’s Q&A session with reporters.”
Robert Ostrowski, CIO for Global Fixed Income, said: “Bond markets respond predictably to a Trump win. While the bond market had somewhat priced in a ‘Trump trade’—higher rates and a steeper yield curve—prior to the election, the trade accelerated as the results became clear on election night. We entered election day neutral on duration, but positioned in the steepener, as we believed a doveish Federal Reserve and recent stronger economic data also argued for that positioning. Moving forward, we will be watching closely as to whether this rate pressure, which is consistent with the 2016 post-election market action, will lead to volatility in the spread markets.”