Donald Trump’s victory in the 2024 US Presidential Election could introduce volatility to UK swap rates, as markets react to the anticipated policy stance of a Republican-led administration.
Investors and analysts are watching closely, with expectations that the President Elect’s economic agenda — centered on tax cuts, deregulation, and trade tariffs — will impact both inflation and interest rates globally.
Daniel Casali, chief investment strategist at Evelyn Partners, said: “Of course, much of what Trump said in the election campaign is rhetoric, designed to win over voters, so the question is what happens in reality.
“What we do know is that a Republican-led Trump administration stands for lower taxes, less regulation, and more trade tariffs.”
Casali highlighted potential consequences of Trump’s economic promises, stating: “Trump’s pledge to lower taxes, funded by tariffs on all imports, may be good for equity markets right now, but what his policies also entail is more debt.
“Tariffs have the potential to be inflationary, as they will probably add to consumer end-prices, which subsequently might impact consumer confidence and economic activity.”
The impact on UK swap rates could be significant if US inflation rises and drives the Federal Reserve toward tighter monetary policy, placing indirect pressure on the Bank of England.
As a global economic powerhouse, rising inflation and interest rates in the US often lead to similar trends globally, influencing UK swap rates and thus increasing borrowing costs.
Laith Khalaf, head of investment Analysis at AJ Bell, advised a measured view on the market response.
She said: “The US election result will likely have an impact on the short-term direction of markets, especially to assets linked to interest rates.
“But investors need to put the sound and fury of the US election to one side when considering whether to invest in the US and maintain a longer-term perspective.”
Analysts suggest UK markets may see increased volatility in the near term, with rising swap rates potentially affecting corporate and mortgage borrowing costs.
Investors and policymakers alike will be closely watching Trump’s next moves for signs of how these policies might reshape the financial landscape on both sides of the Atlantic.
Article from The Intermediary by Jessica O'Connor
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