If Trump is victorious in the US election, he is likely to focus on tax cut extensions, tariffs, migration and deregulation, all of which could hamper economic growth, says Axa Investment Managers.
David Page, head of macro research at AXA Investment Managers, said a Trump presidency would create a modest headwind for growth in 2025, growing to a more “meaningful interruption” in 2026.
In contrast to Trump’s policies, Democratic vice president Kamala Harris, the likely nominee to succeed President Biden, would be likely to broadly follow the same economic agenda as Biden, namely to implement a partial tax cut extension, deliver some fiscal consolidation and enact a less severe clampdown on migration, says Page. However, she would likely face a Republican majority Senate which would impact legislation.
Despite the uncertainty, Axa Investment Managers believes the Federal Reserve is unlikely to be swayed by the election’s timing.
Page said: “However, we believe the Fed would likely maintain more restrictive monetary policy under Trump in 2025 but would expect it to have to ease more materially beyond 2026 to offset growth concerns. We would also expect Fed chair Jerome Powell’s term to end in 2026 under Trump.”
To date, Trump’s higher net approval ratings have boosted the dollar and Treasury yields.
Page said: “We argue these asset classes could move further in this direction if Trump were re-elected. However, we are more ambivalent about the potential impact on risk assets, particularly equities. We also expect that over the medium term, this dynamic is likely to shift to a weakening outlook for the dollar, bonds and equities.”
