Trump's return and its grip on global market volatility

On Monday, 20th January, Donald Trump will be sworn in as the 47th President of the United States. This marks the first time a Republican has held this position since 2017-2021.

- Donald Trump adheres to a tactic of keeping everyone uncertain, so one thing is certain: it is impossible to predict what he will do. One can only apply the ceteris paribus principle, meaning assessing the markets while assuming preliminary conditions remain unchanged, believes Piotr Kuczyński, a financial markets analyst at Xelion Investment House.

Donald Trump's main election slogan was "America First". If the president maintains this course, we should anticipate a policy that favours American business. This is crucial for Wall Street, the USA's financial centre.

Trump promises a golden era, strengthening the financial position of the United States not only as a country but as an empire of private enterprises. It's unsurprising that this appeals to investors. After all, it's a battle for technological and financial dominance, says Eryk Szmyd, a financial markets analyst at XTB.

Mateusz Krupa, an equity market strategist at mBank Brokerage House, recalls that the previous Trump administration was known for its pro-business rhetoric, corporate tax cuts, and deregulation. According to our interviewee, a focus on stimulating the U.S. economy could benefit cyclical sectors (finance, high-end consumer goods, industry), as well as those like the defence industry, energy (especially oil and gas), and infrastructure.

Trump often emphasised the priority of U.S. energy independence, which could create a favourable environment for companies in the mining and fossil fuel sectors. For investors, these are potential opportunities, but Mateusz Krupa says the market must also be prepared for short-term volatility caused by his impulsive decisions and protectionist policies.

Eryk Szmyd concurs. The XTB analyst notes that investors' attention will focus on the energy sector, which could benefit from deregulations, a return to traditional fossil fuels, and the revival of the nuclear sector.

In his view, stocks of American companies, benefiting due to their special role in the U.S. economy and broader industrial machinery, could prosper. Indirect beneficiaries of increased volatility in global markets will include financial sector companies like CBOE Global Markets or the Chicago-based CME Group. Small and medium American companies also have prospects to consider.

Reindustrialisation aims to make the USA more resilient against potential conflicts with China and free the West from reliance on Asian markets. Meanwhile, energy independence and nuclear investments aim to support new technologies related to artificial intelligence. This leads Eryk Szmyd to conclude that during Trump's presidency, investors will be inclined to pay more for "Made in America" companies, which are less exposed to Asia and possess greater business resilience to market changes.

According to the XTB analyst, Wall Street may focus on technology-industrial companies linked to the U.S. defence sector and strategic investments. This encompasses not only defence corporations but also a range of companies around the military-industrial complex and infrastructure. These include advanced electronic and mechanical parts suppliers such as Heico, Curtiss-Wright, Teledyne Technologies, Howmet Aerospace, Palantir, Axon Enterprise, and Parsons, as well as BWX Technologies, a provider of solutions and services for the civil and military nuclear sector.

Eryk Szmyd argues that investors will also be interested in shares of major industrial conglomerates like GE Aerospace, Honeywell, 3M, and Rockwell Automation. Even if technology companies do not fall from their pedestal on Wall Street, they may face challenges due to export restrictions and uncertainties related to China. It is certain that in the context of Washington-Beijing relations, the topic of Taiwan will frequently resurface. Additionally, the expansion of the American fleet and the development of underwater drones could support the business of the Huntington Ingalls shipbuilding corporation.

- Just observe companies like Vistra to realise that it's not only Nvidia and the tech sector offering incredible opportunities to investors, says Szmyd. - Trump is also focused on cryptocurrencies, with a particular emphasis on Bitcoin, for which the year 2025 appears promising, he adds.

A crucial risk highlighted by Mateusz Krupa from mBank is the return of the United States to an aggressive trade policy, particularly against China.

Trade wars, characteristic of Trump's first term, could reignite tensions in markets and harm global supply chains. The analyst believes prolonged trade conflicts might negatively impact export sectors and companies heavily reliant on international markets.

Piotr Kuczyński from Xelion is more optimistic on this front. - Trump's tariff policy won't be as severe as announced before the elections. Tariffs on Chinese products will be selective and much lower than the proposed 60%. The same will apply to European products. China will counter these tariffs with fiscal support for its economy, so I assume that 2025 will belong to Chinese stocks, the money.pl interviewee opines.

According to Kuczyński, precious metals merit attention. Mateusz Krupa shares a similar view.

In the face of potential uncertainty, gold and the US dollar might serve as safe havens, although the dollar's unpredictability is noteworthy, as it notably weakened after Trump's previous inauguration due to increased investor appetite for risk, says the BM mBank strategist.

According to Krupa, it's worth monitoring US Treasury bonds, which traditionally gain value during periods of heightened risk. Their current yields, especially compared to the relatively high valuations of the American equity market, appear attractive to him.

Regarding the Polish financial market, Piotr Kuczyński foresees it behaving similarly to the European one, and does not anticipate any negative impact on Poland-US relations due to pre-election criticism of Trump by Polish politicians.

- If that were the case, J.D. Vance wouldn't be vice president (having termed Trump an American Hitler), and the previously very critical Elon Musk would not be among the new president's closest associates, the Xelion analyst argues.

He believes that the most crucial factor for Poland now is to achieve a prolonged suspension of the conflict between Russia and Ukraine. He estimates the probability of a truce at 50%.

- It might transpire that not only will the conflict continue, but Vladimir Putin might aggravate tensions with Trump, escalating the situation further, which would be highly detrimental to Poland, says Kuczyński.

From a global perspective, the Trump administration might again shake confidence in international alliances, potentially destabilising markets in regions like Europe and Asia. This is highlighted by Krupa from mBank in our conversation, noting that for investors, this spells potential upheaval in sectors tied to international trade and developing markets, particularly those reliant on trade with the USA and China.