2024 was one of the most turbulent years on the planet in political matters. The holding of electoral elections in fifty countries representing nearly 60% of the world’s GDP added a dose of difficulty to the stock market scenario throughout the year which, however, does not usually translate into losses in the equity markets despite to possible changes. “In the countries that went to the polls, 80% of the incumbent governments were overthrown by the global populist wave,” says Kevin Thozet, a member of Carmignac’s investment committee.
The main focus, as it could not be otherwise, has been on the US, where Donald Trump was proclaimed winner of the elections in the North American country in a year in which Wall Street complied with market tradition and ended up with profits higher than the 23%. And it is that, the bullfighting have imposed themselves on the market yankee in 11 of the last 13 years that there have been electoral elections in the country (since 1976).
The good news for the bulls is that after the electoral elections in the North American country, the bullish path is prolonged. In fact, 9 of the last 10 years after the US elections have been bullish. For this reason, the American stock market faces 2025 with a certain optimism, although pending whether Donald Trump is capable of translating campaign promises into real policies.
These types of events “give extra volatility, but they do not move the market like central banks and their decisions do,” analysts agree when referring to this concentration of elections. “Despite Trump’s promise of more efficient government and less bureaucracy, Their hands are tied in the largest public spending figures, such as Social Security. Added to this is that he will pressure to reduce taxes. So the Congressional Budget Office estimates that the US debt burden, at 100%/GDP, could increase up to 143% if Trump’s policies are implemented,” explains Christopher Preece, investment manager at Pictet AM.
“Our view is that he will not fully comply with what he suggested on raising tariffs, migrant deportations or tax easing. However, we foresee sufficient results to have a significant impact on US growthas these policies move into 2026,” details David Page, Head of Macroeconomic Analysis at AXA IM.
Be that as it may, the beginning of Donald Trump’s term as the next US president introduces a new dimension in expectations regarding the US economy and, therefore, in the policy of the Federal Reserve.
“We hope that the Fed to continue cutting the federal funds rate to support the labor market, although at a slightly slower pace in 2025 compared to 2024. At the same time, as the economy continues to grow, we expect the favoring risk assets next year”, Payden & Rygel highlight the possible plans of the most important central entity in the world for 2025.
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