In addition to the frightening Russian aggression against Ukraine, President Trump issued three executive orders on 1 February 2025. With these, he instructed the United States to impose new tariffs on imports, all of which are due to come into force on 4 February 2025.
To some extent, we are all aware of the impact of election years, not only in relation to the United States, but also in European markets and Japan. Consequently, we consider the current environment to be particularly challenging in terms of the short to medium-term outlook for equity markets.
As most of us might recall, in 2024 we stressed the importance of the country and the currency selection. Let us recall the repetition of stock allocation and the respective focus on currencies as primary determinant.
By way of introduction, we will look at the performance of the S&P500 and the NASDAQ equity index since 1980 following the respective presidential elections. The aim is to remind investors that they should be prepared for short to medium-term fluctuations. To do this, we use the data from Christopher Hayes and Alex Harring, which is as follows:
The US election campaign ended with the victory of Mr. Donald Trump. At this first viewing we assume that the new Administration might be focusing mainly on US domestic advancement i.e. issues that will be decisive in transforming the US economic setting.
We have no doubt that in recent years/quarters/months the economic discourse has undeniably focused on managing interest rates to combat inflation and, in particular to counter inflationary fears and pressures.
We have no doubt that the economic discourse in recent years/quarters/months has undeniably focused on managing interest rates to fight inflation and, in particular, to counter inflationary fears and pressures.
Due to weak economic growth expectations in the US in early August 2024, stock markets worldwide have been experiencing both great nervousness a well as sharp negative correction. So far in 2024 the correction concerns the US tech giants but not only.
The latest actions by central banks are indeed astonishing. On 8 June 2024, the Neue Zürcher Zeitung wrote: “It rarely happens, for once the Europeans are ahead of the Americans”, citing the interest rate cuts by the Swiss National Bank and the European Central Bank. To make the connection clearer, it was the Swiss National Bank that was the first major central bank to announce an imminent turnaround, on 21 March 2024.
With regard to short- and medium-term expectations, most forecasts can be described as rather pessimistic. We believe that they can neither be considered promising nor relatively coherent. In this EMR, we will focus on the average developments of various stock indices in order to derive a likely, realistic outlook.
