The asset management industry continues to pounder the implications as Trump moves back into the White House today (20 January). 

Cathie Wood, CEO of ARK Invest said 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

"Uncertainty 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."

Nina Stanojevic, senior investment specialist at St. James’s Place said: “With the presidential inauguration taking place today, 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.

“There are several key developments that could shape the economic and market landscape in the coming months:

1. 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.
2. Regulatory Changes: Adjustments in regulatory frameworks, especially in technology, healthcare, and energy, could create both risks and opportunities for investors.
3. Global Trade Relations: Shifts in international trade policies will be critical in assessing global market dynamics and supply chain impacts.
4. Economic Recovery and Inflation Trends: Post-pandemic recovery, labour market health, and inflationary pressures remain key factors in our outlook.
5. 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.”

Vince Truong, financial adviser and partner at GSB, said: “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."

Victoria Hasler, head of fund research, Hargreaves Lansdown said: “A new year, a new president. The lead up to Trump’s presidency has been noisy and, at times, divisive. Markets hate uncertainty though, and the simple fact of having the new president settled in the White House may prove to be a good thing for markets. Over the next few weeks and months, we (and the rest of the world) will be watching closely, listening to the speeches and analysing the policies. No doubt some will have a more positive impact on markets than others – expect some fireworks and associated volatility as we navigate the next four years.

"This notwithstanding, there are good reasons to believe that the impact on the US stock market could be positive, and particularly so for smaller companies. Because trade tariffs, Trump’s most talked-about policy, favour domestic businesses over international conglomerates, and smaller companies are usually more domestically focused. During campaigning, and since the election, we heard a lot about tariffs. We expect the reality to be a little more muted than the campaign chat, but nonetheless at least some new tariffs are likely, particularly when it comes to Chinese trade.

"At the same time, we have the supportive backdrop of monetary policy easing. While we don’t expect interest rates to fall as quickly as originally anticipated, they are almost certainly on a downward trajectory. Historically, small companies have tended to perform well relative to their larger counterparts in a falling interest rate environment, which further strengthens the outlook for smaller companies. Add to that the potential for lower personal and corporation taxes in the US and the tailwinds are building for US smaller companies.

"Looking a little further afield, Trump’s occupancy of the White House could cause some jitters in global equity markets. We have yet to see how his foreign policy will play out, but it could cause tension with certain countries, including China, and tariffs could impact growth in markets which rely on exporting goods to the US. Markets aren’t keen on geopolitical uncertainty, and if tensions escalate, we expect to see increased volatility."

Hasler also looked at how you could invest for the new Trump era, picking out three fund ideas which to consider:

1. Artemis US Smaller Companies
Trump’s policies could likely be positive for domestic-facing US corporates, and that means US smaller companies could benefit.
Managed by the experienced Cormac Weldon since its launch in 2014, the Artemis US Smaller Companies fund seeks out smaller companies with potential for their share price to grow and could be a good option.
We like the way the manager considers how the US economy is performing to actively identify sectors and companies that are benefiting from trends, as well as areas that are finding things tough. We believe this could stand the fund in good stead to take advantage of new or changing policies put in place by the new president.

2. Rathbone Global Opportunities
If you’re unsure of what a Trump presidency could mean for global markets, you could consider an active global fund in which the manager can worry about the risks for you. The Rathbone Global Opportunities fund could be a good option to add some global diversification to your portfolio, while getting the benefit of an expert managing your positions. James Thompson, the fund’s manager, is one of only a few global fund managers to show they can pick great companies and perform better than the broad global stock market over the long term.

He looks for easy-to-understand businesses that can grow to dominate their industry and defend themselves from competition. He'll also search off the beaten track to find companies with superb potential that might be overlooked by other investors. Thomson thinks exceptional companies are few and far between, so he only invests in a small selection. This gives each the potential to contribute significantly to performance. At the moment, he mainly invests in developed markets, like the US, UK and Europe.

3. Troy Trojan
If you’re worried about the impact of tariffs or political instability on the geopolitical situation, a more defensive fund could be a good option to help offer some shelter in turbulent times.

The Troy Trojan fund, managed by Sebastian Lyon and Charlotte Yonge, aims to grow investors' money steadily over the long run, while limiting losses when markets fall.

The fund is focused around four 'pillars'. The first contains large, established companies Lyon and Yonge think can grow sustainably over the long run, and endure tough economic conditions. The second pillar is made from bonds, including US index-linked bonds, which could shelter investors if inflation rises. Some of the fund is also invested in UK government bonds (gilts).

The third pillar consists of gold-related investments, including physical gold, which has often acted as a ‘safe haven’ during times of uncertainty. We don’t think that gold will repeat the 30% return of 2024, but we do think it holds its value this year. The final pillar is ‘cash’. This provides important shelter when markets stumble, but also a chance to invest in other assets quickly when opportunities arise.”