As I write this on a gloomy Remembrance Sunday morning, the Arizona result has just been announced giving Donald Trump a clean sweep of the so-called ‘Swing States’. That makes it seven – nil in these deciding States (eight – nil if one includes Michigan which usually votes Democrat) and, moreover, an unexpectedly emphatic victory to the Republicans who even triumphed in the popular vote, i.e. the total number of votes cast. This final result now gives Donald Trump’s MAGA (Make America Great Again) movement total control of Congress – which comprises the Senate and House of Representatives – and the Supreme Court in which six of the nine Justices are right- leaning.

However one cuts it, half of the United States has been left in mourning. Having had four days to pore over the output of the world’s media, the shock (and dismay) does not appear to be solely contained within the borders of the US. Some of Trump’s adversaries have claimed that the only capital cities celebrating the victory are Moscow, Pyongyang and Jerusalem.

Similar to the UK’s first past the post voting system, the US electoral system raises questions about how a party can win the popular vote by only 2.5% yet still achieve full control. In 2016, for example, Trump won the presidency despite losing the popular vote to Hillary Clinton by nearly three million votes. This phenomenon mirrors the effects of similarly outdated and complex electoral systems in the UK and France, both of which experienced comparable, skewed outcomes earlier in 2024.

Prior to the result, equity, bond and foreign exchange markets had become understandably confused by the preponderance of pollsters calling the election a dead heat. Many analysts put this down to the electorate’s inability and embarrassment to admit support for Trump prior to arriving at the ballot box. The often more accurate barometer of the outcome of such closely contested events are the betting markets, which had Trump narrowly ahead from a week before last Tuesday’s election. One of the funds we invest in on your behalf, the De Lisle US Equity Fund, hosted a webinar in late-October during which they explained the betting markets were pricing in a circa 10% probability of a Republican clean sweep of Congress. This explains the level of shock at the outcome which many Americans have not yet fully come to terms with.

Both US equities and the dollar rallied as it became clear the Republicans had won. Treasury yields also rose amid expectations that Trump’s policies will create inflationary pressure. Bitcoin also hit an all-time high breaching $75,000 for the first time with the trajectory continuing to be upward. During the latter part of last week, equity and dollar gains extended as the scale of the victory became apparent. It is difficult to provide any cogent analysis of the potential sustainability of these gains as uncertainty is the nemesis of markets.

One suspects that even the most ardent Trump supporter would concede that the next few months, prior to his inauguration, will bring some geopolitical uncertainty as military support overseas (NATO), tariffs and trade wars fill the column inches across the world’s media. Perhaps even more so thereafter when Trump and MAGA are let loose. We shall keep you abreast of developments.

SUMMARY

In October’s commentary, we signposted some of the world’s uncertainties. Domestically, we have had the first Labour Budget in 14 years and now have Kemi Badenoch as the Leader of the Opposition, who was noticeably nervous in her first Prime Minister’s Questions (PMQs). Overseas, tensions in the Middle East and Ukraine remain elevated. And, of course, Trump is now President-elect in the US.

Whatever your political persuasion, at least some of these uncertainties are likely to create a level of unease for you. We want to reassure you that we will continue to monitor and analyse geopolitical vacillations as much as we do macro and microeconomic changes in order to provide a portfolio which generates solid long-term, risk- adjusted returns that meets your needs and objectives.

Laurence Forrester – Director