'Trump trade' to fade after inauguration: Banyantree
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The news: Banyantree analysts expect the so-called 'Trump trade', which has boosted markets since Donald Trump's decisive US election win, to fade after the president-elect's inauguration as the reality of some of his election policies sets in.
The numbers: The analysts said that Trump's fiscal policies could exacerbate the current debt problem in the US, which has increased by USD8.3 trillion ($12.75 trillion) under outgoing president Joe Biden.
The non-partisan Committee for a Responsible Federal Budget (CRFB) provided a summary of the budgetary impact of Trump's policy proposals, showing the total impact of his fiscal policies would be a net deficit of USD7.75 trillion.
Looking at other equity market trends into 2025, Banyantree said the impact of artificial intelligence on earnings momentum "may have peaked" in 2024.
AI stocks returned an average of 22.9% from the start of 2024 to 12 July, compared to 4.6% by other equities. Since then, however, AI stocks have fallen an average of 0.3% while the rest of the market returned an average of 6.3%.
The context: Elsewhere, Banyantree said it expects non-US stocks to benefit from an easing monetary policy cycle, though they are likely to feel negative impacts from US tariffs.
Inflation also remains a risk for equities, which may be "caught off-guard" if inflation accelerates in 2025 due to better-than-expected economic growth. Meanwhile, stocks in Asia may continue to struggle next year due to decelerating earnings growth and slowing manufacturing activity.
The source: Banyantree research
