Former Donald Trump had a historical win, clinching hold of the 47th US presidency. The Republican Party claimed control of the Senate.

As markets immediately priced in risk-on environment after the Republic victory, how should investors navigate the markets moving into 2025?

First, all eyes will be on how Trump implement protectionist policies such as higher tariffs, putting pressure on US’s trading partners including China and Mexico. Small cap companies will be major beneficiaries as Trump “America First” policies lift domestic businesses.

With deregulation expectations, sectors such as Wall Street banks, asset manager, private equity firms, cryptocurrencies, energy – especially oil and gas exploration are poised to perform in 2025. On the other hand, renewable-energy stocks will be losers as Trump may not favor large-scale tax credit for this sector.

Investors should brace for large tax cut agenda, reducing corporates and individual income tax further will broadly support corporate earnings and stimulate growth. Additionally, more incentive for businesses whose However, this will be a challenge as it will exacerbate budget deficits, increase borrowing costs, put upward pressure on Treasury yields ,driving up the long end of the yield curve. This potentially slow down the pace of Fed easing.

Amid these, we should expect strong USD as the US economy may maintain confidence encourage more capital flows, potentially an inflationary environment where there is continuous pressure to keep interest rates high.

The S&P 500 is up almost 25% YTD.  Let’s be ready for 2025.

Photo credit: Euronews