The impact of U.S. policy on global stock markets
Karsten Junius, CFA and Chief Economist at J. Safra Sarasin, outlines the potential effects of Trump’s economic policies on global markets. With a unified Republican Congress, Trump could implement fiscal measures and trade policies via executive orders. However, the impact of tariffs remains uncertain, as many companies have already adjusted their supply chains to navigate trade conflicts.
Value stocks and financials: key players in 2025
According to Junius, value stocks might outperform for the first time since 2022, supported by potential interest rate hikes. Financial stocks stand out as major beneficiaries due to:
- rising interest rates;
- deregulation of M&A activities;
- potential easing of Basel III requirements.
These factors position financial stocks as a strong mid-term bet despite possible short-term setbacks.
Healthcare and small caps: additional opportunities
The healthcare sector benefits from a lack of significant political headwinds and support from a strong dollar. For small caps, their domestic exposure makes them likely winners of tax cuts and tariffs. Their correlation with value stocks further enhances their appeal in an inflationary environment.
Regional preferences: spotlight on the UK and Japan
Junius highlights a positive outlook for UK equities, buoyed by a stable pound and limited tariff risks. As for Japan, the market remains neutral but could benefit from rising yields and a strong dollar.
Risks and global outlook
Despite opportunities, risks remain. A potential global trade war could severely impact global growth. However, Junius believes Trump’s policies present more upside than downside, favoring value sectors and shielding markets from inflation.
In conclusion, markets face significant opportunities alongside considerable risks. While global growth may hold steady, the threat of trade escalations looms large.
