Dan Scott

Adopting a more dynamic asset allocation under a Trump presidency. 

The backdrop for equity markets remains positive and the US economy is heading into 2025 with robust momentum. Global stocks further benefit from falling interest rates, positive earnings growth with AI spending and the expectations of fiscal stimulus in the US and China. However, the threat of inflation persists, and markets may need to adjust to upcoming US policies. 

There is a great deal of uncertainty surrounding President-elect Trump’s policy intentions. Questions arise around the likelihood of implementation with a thin House majority and the actual effect of proposed policies on the economy. The risk of policy error (administrative and monetary) has increased.

In the near term, US markets should be boosted by an improvement in economic sentiment through expectations of looser fiscal policies and deregulation. In the later part of the year and into 2026, markets will evaluate the actual execution of policies (tax cuts, tariffs) and whether inflationary pressures could be revived. This, coupled with a larger budget deficit, could lead to higher yields. 

A more regular assessment of the economic landscape will be necessary throughout the year as new data comes and policies are unveiled. The key will be to capitalise on opportunities in risk assets, while assessing the impact of policies and the delicate balance of inflation and growth. This will require investors to adjust their asset allocation and portfolios on a more dynamic and frequent basis.