Neuberger Berman: Global markets bracing for Trump impact

As global markets prepare for shifts under the Trump administration, Rebekah McMillan of Neuberger Berman underscores the wide-ranging impacts of the proposed trade policies.

Rebekah McMillan, associate portfolio manager in the multi-asset team at Neuberger Berman, said:

“The policy proposals from the incoming Trump administration have the potential to escalate trade-tensions and significantly impact global markets, sentiment and financial conditions. We believe if President-Elect Donald Trump follows through on his threats for significantly higher tariffs on imports, prices will increase, putting upwards pressure on inflation and trade activity will decrease, weighing on non-US economic growth, particularly in Europe and China.

“We already believe 2025 growth will be front-loaded as global industrial activity is being bought forward in advance of the anticipated tariffs. For Europe, the main concern is trade policy uncertainty exacerbating existing growth challenges and manufacturing headwinds, particularly for export-dependent economies such as Germany. Emerging Markets also face growth headwinds from tariffs, most notably in China and Mexico, facing the steepest tariff rates.

 
 

“It’s likely some regions will benefit from tariff-driven trade re-allocation and domestic production growth, such as Vietnam and India. Though clearly more negative for non-US, higher tariffs have the potential to soften US consumer demand, along with any impacts of any retaliatory tariff policies on growth. The markets absorption of the policy changes will depend on magnitude and implementation timing of the plans, for the potential universal tariff as well as targeted country specific trade measures.

“In cryptocurrency space, there is structural support following the outcome of the US election, given the changes in regulatory and supervisory leadership at the OCC and SEC which will likely bring much less hostile regulation on the industry. However, some of the other positives being contemplated and priced into the extreme rally by markets will require legislation or significant funding such that they are far from a sure thing, for example the Bitcoin reserve.

“The growth and yield differentials of the United States in comparison to other countries have attracted significant capital inflows to the US, strengthening the dollar to potentially disruptive levels. Whilst the result is a disinflationary effect domestically in the US, it translates to inflation elsewhere, complicating European efforts to support growth with rate cuts, in particular.

“We believe the dollar is already overvalued but momentum is strong and both rate differentials and our US growth outlook make it difficult to identify the catalyst for a reversal. Brazil and Japan have already intervened to shore up their currencies, and we could see this trend broadening and becoming disruptive if the dollar continues to rise against the backdrop of US tariff proposals.

 
 

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