However, he underlined potential for the situation to “evolve”, highlighting among other things the prospect of higher tariffs.
The danger of higher tariffs will be a worry to some Scottish businesses, notably including those in the Scotch whisky sector.
Scottish First Minister John Swinney warned yesterday that Donald Trump’s presidency could be “very damaging” for Scotland’s whisky sector amid fears of tariff increases.
He also raised concerns that jobs could be hit in the whisky industry, as well as in the wider food and drinks sector and in manufacturing more generally.
The pound was yesterday evening in London trading around $1.2879. This was down about 1.35 cents on the $1.3014 level around which it was trading at 5pm on Tuesday night, with this decline reflecting the boost to the dollar from Mr Trump’s victory. Sterling was down nearly two cents against the dollar at its intra-day low of $1.2832 yesterday.
Wall Street got off to a flying start yesterday in the wake of the Republicans’ win, with the Dow Jones Industrial Average more than 3% higher on the day as the London market closed.
Mr Bartholomew highlighted the effect on financial markets of the election having delivered a clear-cut result.
He said yesterday morning: “With the results of the presidential race becoming clear fairly early on, the market-implied expected volatility over coming days has collapsed.”
Mr Bartholomew observed: “More generally, financial markets are behaving in a manner consistent with a red wave. The dollar is stronger, Treasury yields are higher, US stock futures are up, and oil is lower. This implies the market is focusing on the reflationary aspects of Trump’s policies, with the prospect of tax cuts – and the avoidance of parts of [Kamala] Harris’s agenda – boosting risk sentiment.”
However, he added: “As different aspects of his agenda move into focus over time, this reaction may evolve – especially given the prospects for higher tariffs, and the size of potential fiscal stimulus in an already full-employment economy. Indeed, the latest survey data show the US economy remains solid.”
London’s FTSE-100 index of leading shares surged when it opened yesterday morning, on news of Mr Trump’s decisive victory and was, at its intra-day high of 8301.78 points, up 129.39 points on its Tuesday close. However, the FTSE-100 slipped into negative territory in afternoon trading, and ended down 5.71 points on the session at 8166.68 points.
Blair Couper, investment director at abrdn, said yesterday morning: “Over the longer term, a Trump victory is likely to mean a more lax regulatory environment, escalating trade tariffs and potential attempts to repeal components of the Inflation Reduction Act. Markets had already been pricing in the likelihood of a Trump victory. However, it is looking likely that the Republicans will take a sweep of Congress which will make it easier for the party to enact their policy agenda.
“Under this scenario, we believe those areas that could come under pressure are companies more likely to be subject to tariff increases and areas of [the Inflation Reduction Act] that are easier to repeal, such as European auto manufacturers, electric vehicles, and offshore wind.”
However, Nigel Green, of financial advisory and asset management company deVere Group, emphasised his view that “the Trump-driven dip in renewable energy stocks will be perceived as a strategic buying opportunity by savvy investors”.
Speaking at a point yesterday at which shares in renewable energy-focused Ørsted were down 14% in the wake of news of Mr Trump’s victory, with fellow Danish company and wind turbine manufacturer Vestas down 10%, Mr Green flagged growing concerns that Donald Trump “could halt key renewable projects once he is back in the White House”.
Mr Green said: “Trump’s promise to stop offshore wind projects on ‘day one’ of his presidency has raised concerns among renewable energy companies, especially those heavily invested in the offshore wind market. The market’s reaction is understandable, yet it overlooks the broader, global trend toward clean energy that continues to gain momentum, regardless of political cycles.”
He added: ““Despite the potential for a temporary slowdown in some US-based projects, the long-term outlook for the renewable energy sector remains incredibly positive.
“This presents a significant opportunity for investors to buy into the sector at a discount while the market remains focused on short-term uncertainties. While the US may experience a period of political turbulence, the global renewable energy transition is not dependent on any one country or political leader.”
Commenting on the impact on US shares, and particular sectors, Mr Couper said: “Share prices of US companies with supply chains in China are also likely to react negatively whilst domestic manufacturing and US small and mid-cap companies are likely to outperform. With President Trump at the helm, America also faces elevated inflation risks from these policies so we’re likely to see [interest]-rate-sensitive sectors react and the dollar strengthen.
“Areas like financials – i.e. banks – could perform well as rates stay higher for longer. Whilst areas like real estate and growth equities would likely be negatively impacted by higher duration, it is likely that this would be offset by the positive view for markets overall from his policies so we have yet to see whether these sectors would be negatively impacted or not.”
Aaron Rock, head of nominal rates at abrdn, said: “Markets can take solace from a swift resolution of the US electoral process. With fears of contested counts seemingly allayed, repricing of ‘Trump trades’ has been orderly.
“The next challenge is how to trade rhetoric versus policy. Trump’s first term gave a mixed picture in this regard. We expect tax cuts to consumers and business in short order, a key plank of Trump’s populist-leaning outlook. Tariffs may be ratcheted up over the time, for now a threat rather than a reality. Either way, it appears very likely that yet more fiscal expansion is on the way. This does not play well with Trump’s wish to have the Fed (Federal Reserve) cut rates aggressively.”
Ben Lofthouse, portfolio manager of Henderson International Income Trust, said of the stock market’s performance yesterday morning as the US presidential election outcome became ever clearer: “The equity market is responding positively to the fact that the US election looks like it has a clear winner, and that winner is Donald Trump. US interest rates have been rising over the last week, and have continued to rise today, so the election outcome is considered to be potentially inflationary and therefore negative for fixed-income markets. People had expected that the outcome would be closer than it looks and were expecting potential disruption. An uncontested win is itself positive for sentiment.”
Mr Lofthouse added: “Whilst the win brings uncertainty for companies in terms of potential tariffs, there has been a general move towards moving manufacturing either closer to or into the US, and a Trump presidency is likely to accelerate that. Mr Trump has campaigned on a mandate that includes further tax cuts for US companies, and less government regulation, which are generally taken positively by investors, and, as a result, US domestic companies are expected to be beneficiaries. Many US companies we have met this year have attributed lower levels of activity due to caution before the election, so there could be an acceleration of activity in the US post the election.
“It is hard to say what the impact on global markets and inflation will be yet as many of the potential tariff increases are considered by many to be negotiation positions to extract better terms of trade, so may not come to pass, but this will not be known for some time.”
