焦點對談 — 分析美國大選結果

This is an edited audio transcript of the Talking Heads podcast episode Unpicking the US election results

Andrew Craig: Hello and welcome to the BNP Paribas Asset Management Talking Heads podcast. Every week, Talking Heads will bring you in-depth insights and analysis on the topics that really matter to investors. This week on the Talking Heads podcast, we’re going to be discussing the initial impact on financial markets following the election of Donald Trump as US president. I’m Andy Craig, Co-head of the Investment Insight Centre, and I’m joined by Daniel Morris, Co-head of the Investment Insight Centre and our Chief Market Strategist.

Now, Daniel, we’re talking a week after the election, so it’s still early days, but obviously, a lot has happened over. It’s now clear that President-elect Trump and the Republicans have won control of all three branches of the US government. That’s to say, the presidency, the Senate and the House of Representatives. That puts them in a strong position to enact their policy agenda, although there’s still uncertainty about the exact policy agenda and the extent to which it might be rolled out. Can you talk about the immediate reaction we’ve seen in markets following the election?

Daniel Morris: Thanks very much, Andrew. One of the interesting things for us still to think about, is how much of a Trump victory was already priced in. There was partly an expectation priced in, at least to equities, that Trump would win. The real surprise was the extent to the victory. That’s significant because it gives Trump much more scope to implement his policies. If we think about how equity markets have reacted, how fixed income markets have reacted, the first thing of note is the difference in the extent of the reaction, that is to say, we’ve seen very significant rallies in equity markets, but a much more muted reaction in fixed income, either in the short term, as we look at expectations for [the] fed funds [rate] or longer-term Treasury yields. That reflects the market’s assessment that the implications of Trump’s victory, at least for growth and therefore for corporate profits, is at least relatively more clear cut: markets are anticipating stronger US growth, probably higher US inflation. All that means higher corporate profits and therefore [share] prices should be rising. That’s fairly straightforward whether that comes from fiscal stimulus, from deregulation, increased M&A activity, and so on. The uncertainties are much more related to factors that are going to affect fixed income. We talk about tax cuts. We think about tariffs, immigration and the impact that might have on wages. That’s why you see US Treasury yields actually more or less flat compared to where they were before the election, in contrast to equity markets: Russell 2000 up over 9%, NASDAQ 5%. So that’s initial reaction in the markets.

AC: To begin to think about what might happen next, can you discuss what happened last time? By last time, I mean, the reaction following Donald Trump’s election in 2016. History doesn’t always repeat itself, but it sometimes rhymes. And we have, to a certain extent, been here before.  

DM: As a starting point, it probably does make sense to look at how markets reacted under Trump one. Let’s not forget that at that point, the Fed [US Federal Reserve] was just coming off of the extremely low policy rates that you had had post a global financial crisis. And then Janet Yellen started raising interest rates, partly in response to the stimulative measures from the Trump administration, particularly around tax cuts. Of course, today we’re at the beginning of a cutting cycle. Of course, inflation [was] in a much different place: below target when Trump took office. If we evaluate the returns across fixed income, currencies, equities under the first Trump administration, at least through the arrival of Covid, equities did better than fixed income. You saw the S&P 500 do very well, though growth [stocks] did even better. Even though a lot of us think that small caps probably did well given the increase in tariffs that we saw, in the end, small caps underperformed. A lot of that was simply due to the outperformance of growth more broadly. If we look on the fixed income side, we had positive, but not particularly strong returns… a bit better for inflation-linked bonds. That aligns with your view that with that extra bit of growth, you’re going to have higher inflation. Credit did pretty well, which makes sense if you’re an environment where growth is strong. Gold did relatively well, probably reflecting some of those inflation concerns. And broadly, the dollar strengthened. Now, we’ve seen more or less a similar pattern. It’s reasonable to expect at least some of those trends to persist in  the months and quarters ahead.

AC: What do you think lies ahead?

DM: Before trying to answer that, there’s another important thing that’s going on right now, which is that the Fed is cutting rates. And that’s more important for the market, for the macro economy, than necessarily what happens in the US government. US government spending is a comparatively small share of the US economy. Generally, the Fed is much more significant if we look at how assets performed during previous cutting cycles. If we look at returns under Fed cutting cycles, interestingly, they line up quite closely to what we saw under Trump. One, meaning outperformance of US equities, outperformance of credit, particularly investment-grade. Growth stocks did well. In this environment, we anticipate, at least initially, an acceleration of growth. And then the question of whether it goes too far. Now on the other hand, what are the risks, what might happen, what could change the relatively positive reaction in equity markets we’ve seen so far? It’s tariffs, immigration, taxes, geopolitics. Of course, during a campaign, politicians in general say a lot of things that, ultimately, they either decide not to implement or aren’t able to. Even if the Republicans do control Congress, a lot of this stuff will have to be approved. I won’t dare to project too much what we will actually see in terms of tariffs, immigration, taxes. But we appreciate the risks that are out there. For example, if tariffs go too far, if that prompts a global trade war, we all appreciate that it’s going to be [bad] for global growth. If we think about taxation or tax cuts, keep in mind that the US budget deficit [and] debt levels are rather higher than they were at the beginning of the first Trump administration. Do we see a return of the ‘bond vigilantes’ and a bigger increase in US Treasury yields? So clearly, far more questions than answers at this point. I think it is the combination of these four things that will determine how happy we are a year from now.

AC: Well, Daniel, thank you very much for joining me. That’s it for this week’s episode of Talking Heads, although we will, of course, be coming back to the topic of how the new US president and the new Republican administration are affecting developments in financial markets. So please keep tuned in to Talking Heads. If you’d like more information about what’s going on in financial markets, please reach out to your BNP Paribas Asset Management contact or check out Viewpoint, our website for investment insights at viewpoint BNP Paribas hyphen am.com. You’ve been listening to the BNP Paribas Asset Management Talking Heads podcast with me, Andy Craig, and Daniel Morris, Chief Market Strategist. Please do join us again next week. Until then, take care.