Business and consumer tax cuts will be welcomed by the banking sector-that is a safe enough forecast. One might even see earlier rate cuts than previously forecast. Trump inherits a strong economy. The main economic indicators are positive. The US consumer is resilient with sales, retail and housing data all strong.
On the other hand, there is inevitable uncertainty given the unpredictability of President-elect Trump.
Go deeper with GlobalData
Market commentators give their assessment on what one might expect to see as Trump is inaugurated, again.
Cathie Wood, CEO, ARK Invest
The Trump Administration is likely to convince Congress not only to preserve the tax cuts scheduled to expire by year-end, but also to cut other business and individual tax rates and deregulate industries in which large corporations have armed lobbyists and benefitted from “regulatory capture” at the expense of small- to mid-sized companies. As a result, the bull market in equities is likely to broaden out from just a few cash-rich, large cap stocks to a broad swath of stocks that have been hampered by the supply shocks, the record-breaking burst in interest rates, and the rolling recession that have characterized the last four years.
The prospect of lower deficits should allay fears in the bond market, helping to relieve pressure on the 10-year Treasury bond yield and bring it to a level determined more purely by real GDP growth and inflation.
The consensus view today is that rapid real growth will cause inflation; we believe that history suggests otherwise.
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By GlobalDataUncertainty during the transition could add to the wall of worry that has kept the markets on edge recently. Will tariffs trigger another bout with inflation? We think not: instead, those tariffs should be selective and incremental, their discrete effects ultimately displaced overwhelmingly by tax cuts, deregulation, and dollar appreciation. Indeed, we believe the market is likely to discount a successful Trump Administration, which could turn out to be one of the most successful administrations since the Reagan Revolution.
George Vessey, Lead FX Strategist, Convera
On growth data testing Sterling’s nerve
This week’s labour market report and flash PMI data will test whether consumer spending is holding up despite high borrowing costs. If growth disappoints, expectations for earlier rate cuts could build, further weakening the pound.
Sterling needs a U-turn in USD sentiment and some positive news regarding tariffs, although this remains a key source of uncertainty given the unpredictability of President-elect Donald Trump, who will be inaugurated today.
Boris Kovacevic, Global Macro Strategist, Convera
On Fed patience meeting US economy’s mixed signals
Despite the improving inflation picture, the Fed is unlikely to rush into rate cuts, staying on hold at its 27-28 January meeting. The economy remains strong, supported by resilient consumers and better-than-expected retail sales, industrial production, and housing data.
Optimism about the new administration’s pro-growth policies may have added to the momentum behind the US economy lately, but challenges loom. Higher tariffs and potential deportations could create headwinds that test the economy’s resilience in the months ahead.
Scott Dawson, head of research, Derive.xyz
BTC volatility and sentiment
The crypto market is heating up for Trump’s inauguration with signs of increased volatility and bullish sentiment across major assets like Bitcoin and Ethereum.
BTC’s at-the-money (ATM) 1 DTE implied volatility (IV) has risen sharply, climbing from 35% yesterday to 83.5% today. This surge reflects heightened expectations for market swings in the immediate aftermath of the inauguration. Meanwhile, the 7-day ATM IV has risen more modestly, from 62.2% to 73.3%, suggesting traders anticipate short-term price turbulence but steadier movement beyond the next week.
The buildup in short-term BTC volatility highlights growing uncertainty and excitement as traders brace for potentially significant price movements tied to the inauguration. The positive launches of the $TRUMP and $MELANIA tokens over the weekend shows the crypto-friendly tone of the incoming administration, which could further boost sentiment in the space.
BTC’s 7-day skew has jumped from -3.25% on January 10, to +9.5%, signaling that calls are now trading at a premium to puts. This indicates increased demand for upside leverage, as traders position for a bullish market response.
Meanwhile, the longer-dated skew has remained relatively stable at approximately 6%, indicating that the market maintains a generally positive outlook over the six-month horizon.
Over the past 24 hours, approximately 54% of BTC premiums were spent on buying calls. This suggests traders are positioning for upside potential, while 32.4% of premiums were from calls sold, possibly reflecting an effort to capitalise on perceived overpricing in the market.
Nigel Green, CEO, deVere Group
With at least 100 executive orders reportedly ready for signing on his first day in office, the newly re-elected president will launch initiatives targeting trade tariffs, deregulation, and defense spending, which are likely to jolt markets and shape investor expectations over the coming months.
Protectionist tariffs
President Trump’s commitment to reshaping global trade is expected to kick off with tariffs on China, Canada, and Mexico.
Reports suggest incremental hikes of up to 25% on trade with these nations will commence immediately. Trump’s tariff plans, including broader duties of up to 20% on all imports, could significantly disrupt supply chains while stoking inflationary pressures.
Investors in multinational corporations and export-heavy sectors should remain vigilant for shifts.
The inflationary impact of these tariffs could push consumer prices higher, potentially forcing the Federal Reserve to reconsider its current rate path and implement additional interest rate hikes.
Currency markets are already anticipating these dynamics, with the dollar likely to strengthen in the short term before facing depreciation as inflationary concerns deepen.
Deregulation policies
Deregulation is set to reignite the financial, energy and crypto sectors, with expectations that Trump will roll back many of the restrictions imposed during the Biden administration.
Banking stocks, which rallied post-election, could see further gains as Wall Street prepares for a more business-friendly environment.
Financial services firms, fossil fuel producers and digital assets like Bitcoin stand to benefit, with potential ripple effects across equities and credit markets.
Defence spending surge
Under Trump, defense budgets are anticipated to surge, giving rise to new opportunities in aerospace, cybersecurity, and logistics sectors. This increased spending may strengthen defense stocks, while potentially crowding out private investment in other sectors.
Gold poised for gains
Trump’s sweeping policies are likely to ignite inflation, further bolstering the appeal of safe-haven assets such as gold. China’s pivot toward gold and away from the dollar is set to exacerbate these trends, potentially leading to record highs in bullion prices.
What this means for investors
The next six months will be marked by uncertainty, with the interplay of protectionist policies, deregulation, and inflationary pressures dictating market moves.
Strategic diversification and a focus on inflation-resistant assets could be key to safeguarding portfolios and seizing opportunities in the new economic reality.
With Trump’s economic vision underway, investors must prepare for a fast-changing landscape in the world’s largest economy. Seeking tailored advice now is critical to capitalising on the turbulence and emerging opportunities.
Daniel Casali, chief investment strategist, Evelyn Partners
When you consider the impact on markets of potential policy changes from the incoming US president, the game of ‘Top Trumps’ could be an apt way to determine how investors should navigate the months ahead under the new US premier. First released more than 40 years ago, Top Trumps uses cards that contain a list of numerical data based on various themes, such as cars, boats and aircraft. The aim of the game is to beat your opponent’s card by comparing values and using probabilities.
Investors can take a similar approach in using financial and economic metrics to find the Top Trump market opportunities as Donald Trump takes office to become the 47th US President. Considering the post-pandemic recovery dynamics of the last few years, 2025 will see relatively solid global economic growth, policy easing and further technological innovation.
On growth, Bloomberg’s survey of economists forecast global real Gross Domestic Product (GDP) to expand by 3% in 2025, roughly in line with the long-term average. Leading the way is the US economy, where president-elect Trump is likely to bring in tax cuts and introduce significant deregulation.
While the start to the year was marked by a sell-off in Treasuries and UK gilts, better-than-expected inflation data on both sides of the pond has led to a rally in bonds on the day. The UK inflation data for December came in lower than forecast at 2.5%, and while the US monthly rate was in line with expectations, rising to 2.9% in December, the core number, which strips out more volatile items such as food and energy, came in slightly lower than expected. This may bode well for further rate cuts from both the Federal Reserve and the Bank of England in the coming months.
Vince Truong, American financial adviser and partner, GSB
We’re already seeing what the impact of the Trump administration will have on global markets. US equities are a whirlpool sucking assets away from other countries as market participants largely expect pro-growth policies in the US. This is one among other reasons why US equities outperformed last year, and especially post-election.
Moreover, the US Dollar is strengthening as assets move into the US and trade in the US. It’s also in anticipation of potentially higher tariffs, leading to higher inflation, leading to higher interest rates and thus a strong dollar. So, the market is frontrunning these events.
For the US economy, in the near term, Trump’s policies on lower corporate and individual taxes is pro-growth and should strengthen companies and households, especially those with assets, provided that the tariff policies are not too jarring or disruptive.
The impact of higher tariffs on the investment markets will depend on how gradual and surgical they are. If they’re a sudden sledgehammer, that will have at least a short-term negative impact, likely causing a dip or correction (5-10% drop). But if they are surgical, measured and gradual, then the impact should be nominal. As we don’t know the nature of the tariffs it would be best to temper excitement during what will be a period of short-term volatility to better assess what actually gets enacted.
Susannah Streeter, head of money and markets, Hargreaves Lansdown
The FTSE 100 has opened the week buoyed by positive winds and renewed investor enthusiasm. It is close to clinching a fresh intraday record. After reaching an all-time high on Friday there seems little to spark a pull-back, with US markets shut for Martin Luther King Day.
However, all eyes will be on Donald Trump’s inauguration later as the 47th President of the United States and his comments are likely to hold sway on markets.
In particular, there will be intense interest in any clues as to just how punishing tariffs could be during his term, and the knock-on effect for inflation and global trade. The pound has gained a little ground against the dollar, but it’s still bumping around at $1.22, close to 15-month lows partly due to the enduring strength of the dollar. There’s respite for the UK government in terms of its borrowing costs. With bets high that the Bank of England will plump for a rate cut in February, 10-year gilt yields have eased off to 4.6% – down from 4.9% less than a week ago. With the UK no longer in the eye of the storm when it comes to market turmoil, it’s helping improve investor sentiment.
The impact of Trump on gold
Gold has gained ground amid the uncertainty about the outlook for the world economy with Donald Trump returning to the White House. It’s currently trading above $2,700 per ounce, off its October highs but is gaining back some ground. Gold is shining as a ‘safe haven’ asset, with investors seeking shelter to weather the storm of unpredictability. There are concerns that widespread tariffs will push up US consumer prices, increase inflation, and lead to interest rates staying higher for longer. There are also risks that a strengthening dollar will lead to inflation being exported to other countries which import dollar denominated commodities. There is a possibility, however that global companies will lower prices to stay competitive in the US market, which could have a deflationary effect on some economies over the longer term.
World leaders will be waiting on tenterhooks to find out whether rhetoric on the campaign trail will become reality once Donald Trump is back in the Oval Office. There will be plenty of tricky diplomatic tightropes being walked. UK Prime Minister Keir Starmer is thought to be eyeing up an early trade deal with the US, but he’s likely to be lining up in a long queue. There are concerns that industries such as pharma, mining, fishing and the drinks industry could be affected. The impact of Trump’s tariffs may be more minimal overall for the UK, given the majority of trade with the US is in services which are likely to be exempt from the bulk of planned new duties. However, finance, consulting, logistics or insurance firms for example could still be affected if they support the trade of goods around the world. The International Monetary Fund has warned about the risks to supply chains and global trade, with Canada, Mexico and China bracing for the worst initial effects.
The impact of Trump on crypto
With the writing on the wall so overwhelmingly pro-crypto as Trump returns to the White House, Bitcoin has surged again in value to a fresh record high. It jumped almost 7% to trade above $108,000. The crypto markets have been riding the FOMO waves, with speculators fearful of missing out on the euphoria sparked for coins and tokens.
With both the President and the First Lady launching meme coins just before the inauguration, it’s being taken as a sign that Trump’s pledge to make the US the Bitcoin capital of the world will be honoured. Policy is expected to be outlined to make Bitcoin a strategic US asset and build up a reserve in the cryptocurrency. Detail is also expected about plans to increase US dominance in Bitcoin mining and gain greater access to the blockspace to increase transaction capacity for US individuals and companies. There are expectations that crypto will be brought more into the financial mainstream, with clearer rules about how individuals and firms can trade such assets. All these are high hopes, which just a few years ago looked ‘pie in the sky’ but now appear much closer to reality, given how Trump has turned such a cheerleader for crypto. Its creeping influence in the world of finance can’t be ignored. Nevertheless, investors should be mindful of getting carried away in a wave of speculation, with money they can’t afford to lose. Although institutional interest and expected changes in regulation are adding more legitimacy, it’s still a highly volatile asset and has a history of dropping sharply after steep climbs.
Daniele Antonucci, chief investment officer, Quintet Private Bank
Tariffs could be enacted as soon as today, with Donald Trump expected to sign executive orders after taking office. We think tariffs are likely to be a negotiation tool rather than a goal. After all, Trump’s negotiation strategies, outlined in his book The Art of the Deal, emphasise boldness, preparation, leverage, publicity, and persistence. Moreover, with a more pro-business team than in Trump’s first term, the policy tone may be more balanced but still driven by “America First.”
Raising tariffs too quickly risks stalling growth with rising prices, countering Trump’s goals to boost growth and control inflation. The inflationary impact will depend on tariff size and scope. High US reliance on imports suggests tariffs may be inflationary. The effect could be offset if domestic industries absorb the costs. However, it’s worth noting that a strong US dollar reduces import expenses.
While tariffs may have a neutral impact on the US economy, they could strain relations with affected countries like China, Mexico, Canada, and Europe, and are likely to be negative for these economies. Due to the risk of tariff rises, we don’t hold any tactical positions in European or emerging market equities. We’ve also adjusted the protection against equity drawdowns in Europe we’ve held, to increase the reactivity to these potential negative events the European equity market faces over the short term.
From an investment perspective, we maintain an equity overweight, with a preference for US equities. Still-strong US growth supported by an AI investment cycle and the Fed rate cuts are positive catalysts. Meanwhile, risks of higher inflation made us swap shorter-dated inflation-protected bonds with longer-dated ones.
The US dollar performed well in late 2024 relative to the euro and pound sterling, thanks to the strong US economy and expectations of Trump’s election win. Markets believe his policies will boost growth, especially compared to the weaker Eurozone and UK. This has driven demand for the dollar, with many positive developments already factored in, while negative news is priced into the euro and pound sterling. As a result, a stronger dollar versus these other currencies has been a popular trade.
However, while dollar strength in the near term is our base case, the risk is that this might not last throughout 2025. We think the dollar is currently overvalued and overbought, and Trump may face challenges in fully delivering his growth and inflation promises. Even with scaled-back policies, a larger fiscal deficit is likely, which could weaken the dollar at longer horizons. If Trump fully implements his agenda, it might put even more downside pressure on the US currency.
Meanwhile, Europe’s situation could surprise us. With expectations already low, there is room for better-than-expected outcomes. In particular, the Eurozone economies are especially competitive against the strong US dollar, and the euro is near its 2022 lows despite no energy crisis. The political uncertainty in Europe may also ease. In Germany, a grand coalition could slightly relax strict fiscal rules. France’s situation is less clear, but fiscal consolidation could be delayed, supporting growth.
In short, the US dollar may stay strong in the short term but give back some value as 2025 progresses. At the same time, the euro might gain from improving conditions and reduced uncertainty. This sets the stage for a shift in currency dynamics (with the pound sterling moving more sideways at this stage). But the balance of risks remains in favour of a strong US dollar.
Nina Stanojevic, senior investment specialist, St. James’s Place
As the upcoming presidential inauguration approaches, we recognise the significance of this transition and its potential impact on the markets and economy. Despite the uncertainty surrounding the future direction of the new administration, investors should avoid making any immediate portfolio adjustments in response to this political development. Historically, markets have shown resilience across political transitions. Reacting to short-term political shifts introduces unnecessary risk and often undermines long-term returns. Investors should remain disciplined and avoid reactionary moves that could detract from sustained growth.
Key developments that could shape the economic and market landscape
- Policy Direction and Fiscal Stimulus: We’re watching for clarity on fiscal policies, infrastructure spending, and tax reforms, which could impact different market sectors and economic growth.
- Regulatory Changes:Adjustments in regulatory frameworks, especially in technology, healthcare, and energy, could create both risks and opportunities for investors.
- Global Trade Relations: Shifts in international trade policies will be critical in assessing global market dynamics and supply chain impacts.
- Economic Recovery and Inflation Trends: Post-pandemic recovery, labour market health, and inflationary pressures remain key factors in our outlook.
- Monetary Policy: The Federal Reserve’s approach to interest rates has the potential to influence market performance.
Within this environment, we see compelling opportunities in historically underperforming asset classes like small-cap stocks and emerging market equities. Small caps are trading at exceptionally low valuations, which places them in a positive position for strong rebounds. Similarly, EM equities are poised for growth, with compelling valuations supported by structural trends such as urbanisation and favourable demographics. Additionally, bonds continue to offer attractive yields and defensive qualities, serving as a vital counterbalance to equities amid market uncertainty and volatility.
As the new administration begins its term, the potential for unexpected policy shifts and geopolitical developments increases the risk of extreme market events. In this environment, broad diversification should remain a cornerstone strategy – not just for protection against volatility but also for capturing mispriced investment opportunities that support long-term growth.
Seamus Rocca, chief executive officer, Xapo Bank
As we approach President-elect Donald Trump’s inauguration, the Bitcoin community is eager to see how he delivers on his bold message from Bitcoin Nashville—that the US should be embracing this transformative industry. Trump’s acknowledgement of Bitcoin’s potential and his calls for American leadership in the space have sparked renewed optimism across the market.
2025 is shaping up to be an exciting year for crypto, with the US facing a pivotal moment. The market is keenly watching for progress not just on regulatory clarity but also on how the administration might view Bitcoin as a strategic reserve asset. These moves could redefine the US’s position in the global digital asset landscape.
With Europe leading the way through frameworks like MiCA, the US has some catching up to do. The first 100 days of this administration will be critical in laying the groundwork for common-sense regulation that supports innovation and strengthens Bitcoin’s role in the financial ecosystem. We’re looking forward to seeing how the US can capitalise on this moment and lead the charge toward a Bitcoin-powered future.
