US: Towards a Major Change in Economic Policy
House Views
November 2024
SG Kleinwort Hambros Monthly House Views November 2024
Our Main Convictions
Economic Outlook
Our Asset* Allocation*
Our Asset Allocation *in Detail*
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November 2024 House Views
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The victories of the Republican party have changed the economic outlook for the United States. The outcome of the elections yet again differed from what the polls had predicted. The Republican camp won not only the White House but also both chambers of the Congress (Senate and House of Representatives). This combination would put the new President in a strong position to implement the policies announced during his campaign. His stated desire for an accommodating fiscal policy (i.e., lower taxes) would provide a short-term boost to economic growth. However, his more restrictive trade and migration policies could generate renewed pressure on inflation, compelling the Federal Reserve to maintain a more restrictive monetary policy. The resulting higher interest rates could weigh on economic activity in the medium to longer term.
We’re adjusting our outlook for investments accordingly. The more optimistic short-term outlook for the US economy encourages us to maintain a favourable outlook for equities, not least US equities. It also leads us to be cautious of US Dollar bonds in the short term, which may be penalised by expectations of a more restrictive monetary policy in the short to medium term. The prospect of higher interest rates in the United States also prompts us to expect a strong US Dollar. As ever, US policies will have consequences for other markets. European equities could benefit in the short term from a stronger US economy, and the otherwise stabilising domestic economies. Investors will favour companies and sectors that are both exposed to US activity but with limited risks in terms of tariffs and other trade restrictions. Elsewhere, there are risks for emerging equity markets, with China especially vulnerable to an escalating trade war.
Uncertainty remains high, and diversification remains important. The election results are not yet definitive, and the economic policies of the new US majority have yet to be clarified let alone put into practice. Also, the geopolitical context may become more complex given the changing political balance in the US. We prefer to maintain a highly diversified global positioning. We also acknowledge that demand for gold may continue to persist for longer than previously anticipated, despite lacking any real yield or similar fundamental appeal.
Unless specified, all figures and statistics in this report are from Bloomberg and Macrobond on 10/11/2024 publication completion date. Past performance does not prejudge future performance. Investments may be subject to market fluctuations, and the price and value of investments and the resulting revenues may fluctuate downward and upward. Your capital is not protected, and original investments may not be recovered.