All of the controversies. All of the criminal and civil legal cases against him. All of the criticism from opponents at home and abroad, and even from some in his own party.

In the final event, none of it counted as much as the immortal political question: “Do you feel better off than you did four years ago?”

The answer to that question among many Americans was a resounding no.

And now Donald Trump, 45^th President of the United States, will also be its 47^th.

At the time of writing, President Trump is on track to achieve a bigger victory than he did in 2016. He will also be the first US leader to return to the White House after a defeat since Democrat Grover Cleveland in 1893. Politically, this is certainly quite a moment – a comeback for the history books from a man who had appeared disgraced amid the Capitol riots at the end of his first term.

Still, the politics are a matter for the American people. What, at this early stage, can we say about the potential implications for investors?

The conventional wisdom heading into the election was that a Trump victory would mean higher economic growth and stock prices, but also higher inflation and government borrowing.

At the time of writing on Wednesday morning, the early market moves are consistent with this picture. The primary US stock market is projected to open up by around 2%; the smaller company index by around 6%; and the technology company-focused Nasdaq index by around 2%. Even most UK and European markets are up by between 1-2%, as investors expect US growth will power the global economy.

However, US government bonds have declined in value this morning. This means the interest rates that the government will have to pay to fund its enormous deficit will rise.

The reasons for these two moves likely stem from the same elements of Trump’s platform. Similar to his first term, he plans to deregulate for business while reducing corporate and personal taxation.

The upshot of both of these moves, all else being equal, should be higher economic growth and corporate profits – hence the favourable reaction from shares – but also higher inflation and government borrowing, both of which form a tougher backdrop for bonds.

At least bonds have already repriced downwards quite considerably in recent months on the back of US economic strength and the possibility of President Trump, which may limit further downside in the asset class.

However, keep in mind that under the US system there is also the factor of which party wins the elections for the House of Representatives and the Senate also held yesterday. Victory for the opposing party in either of these can severely restrict a president’s room for manoeuvre on domestic policy.

We already know that Donald Trump’s Republican Party have taken the Senate. But the final result for the House is not yet clear.

In other moves:

• Oil prices are down by around 2% this morning on expectations that a Trump administration will further boost drilling and so expand supply, which is already at a record high. While lower oil prices are broadly positive for consumers, this is a relatively small move in context and prices will continue to move in reaction to geopolitical developments.
• Trump has spoken favourably about cryptocurrencies in recent months and this morning the price of Bitcoin – famously volatile and very high-risk – is running at a record high of over $73,000.

There are perhaps two other key considerations for investors this morning.

One is the geopolitical picture. Trump is noted to be distinctly cooler on aid to Ukraine than Joe Biden and Kamala Harris, which may be perceived as contributing to a less stable global order with even less observance of international rules at present.

Trump and his party are also strong supporters of Israel, which may give licence for the wars in Gaza and against Hezbollah to continue for longer. It is worth noting that markets have been largely untroubled by both conflicts in recent months, though Trump’s stances could perhaps enable slightly higher volatility at the margins.

The other is Trump’s stated plan for a big extension of trade tariffs to ‘protect’ domestic American industry. On the campaign trail, he raised the possibility of an astonishing 60% tariff on goods from China and up to 20% on goods from the rest of the world. While both Trump in his first term and President Biden each expanded tariffs, these moves would represent an enormous broadening which would fly in the face of the conventional economic wisdom that free trade leads to the best outcomes.

It is possible that, in practice, Trump will scale down his plans – he has, after all, been known to exaggerate once or twice in his political career (!) It is also true that there was considerable concern when hefty tariffs, mainly on China and global steel imports, were introduced in his first term – yet global stock markets continued to march higher. Still, it is possible that in the coming days and weeks, markets begin to try and price what the likely implications are here, which could cause some temporary volatility.

The investment conversation around the potential expansion of tariff policy has been interesting. Most talk has focused on how tariffs would increase the cost of goods and services and so, very obviously, add to inflation. It is true that this would be the clear first-order effect. This dynamic has also arguably contributed to the recent repricing of bonds and the downward revision in the number of rate cuts the Fed is likely to deliver over coming months.

Yet there has been much less discussion of the likely second-order economic effects. Tariffs are, quite literally, taxes. A big expansion in tariffs across the board would effectively act as a massive new national sales tax, much like VAT in the UK. This would reduce consumers’ spending power and so eventually have a deflationary impact. It is also unclear that markets have yet fully priced the impact on businesses of a massive increase in their input costs.

This kind of ‘cost-push’ inflation is not the same as the ‘demand-pull’ inflation, over which Fed policy has more control. Jerome Powell and his team would be well aware that higher interest rates would not be able to do anything to ameliorate ‘cost-push’ inflation resulting from tariffs – and that this would in fact be counterproductive. It is possible that, contrary to the current conversation, rates may even have to be lowered more swiftly in this scenario to support demand.

The picture will become clearer over the weeks ahead. But whatever the short-term gyrations that may occur, it is worth remembering that betting against the powerhouse US stock market has rarely been a smart move in recent years – no matter who has been in the White House.

This was a big Budget – on multiple fronts.

The first from a Labour government since 2010. The first delivered by a female Chancellor of the Exchequer. Surely one of the longest speeches ever delivered at the despatch box.

Most would agree, the most anticipated, the most speculated-about, perhaps the most feared Budget statement in modern history.

As a piece of political and economic box office, it did not disappoint.

The headline, stated surprisingly baldly by Rachel Reeves herself, is that the Budget raises taxes by an eye-opening £40 billion. That’s not far off 2% of the UK’s entire annual output.

Although as promised by Reeves ahead of time, there is nothing in the way of direct increases to the ‘big three’ taxes – income tax, employee National Insurance (NI) and VAT – there is still plenty for anyone investing in or doing business in the UK to note.

The bulk of the tax-raising burden has fallen on business, that much is clear. The increase in employer’s National Insurance (NI) is considerable, with the rate rising from the current 13.8% to 15.0%. This is coupled with a sharp reduction in the threshold at which employer’s NI starts to be levied, from the current £9,100 to £5,000. These measures alone will raise around £25 billion.

According to our calculations, these changes will increase the cost of employing a worker on a salary of £35,000 by over £1,000 from April. At the same time, the National Living Wage (NLW) will also rise again, by an inflation-busting 6.7%. This will add £1,400 to the cost of employing a full-time worker on the NLW.

These changes will wreak sizeable increases in the wage bills of many businesses. Indeed, the Chancellor herself obliquely noted that some negative knock-on effects were likely; it does not take a rocket scientist to work out these will come in the form of reduced hiring and lower or fewer pay rises and bonuses for employees. That is likely to act as a headwind on consumer spending in a service-led economy.

The other tax rises in the Budget are likely to be less consequential, whatever the losses or unhappiness they create for those in particular circumstances. The increases in Capital Gains Tax were lower than much speculation had suggested, while changes to IHT eligibility and reliefs are too modest in scale to affect the broad macroeconomic picture.

Whether one agrees with the higher taxes or not, there are positives in what is to be done with them. Increased funding for creaking public services is not just a positive end in itself; a healthier, better-educated population should reduce public spending in the long-term (through lower NHS and benefits bills) and contribute to structural economic growth (through higher productivity).

Further, targeting the payment of all day-to-day spending through tax revenue rather than government borrowing, as per the government’s new ‘stability rule’, could help keep market interest rates low. Indeed, the independent Office for Budget Responsibility expects that the government will now be running a surplus of £10.9bn on what is known as the ‘current budget’ by fiscal year 2027-28.

Separately, the decision to change the government’s debt target to exclude investment spending should also be beneficial in the long run. The UK has long suffered from a dearth of investment – both public and private – which has contributed to sluggish economic growth in recent years.

Borrowing to invest in better transport infrastructure, green technologies and life sciences should begin to raise the productive potential of the economy in the years ahead.

While there are no cast-iron promises in politics – and no defence against further unforeseen crises like pandemics or wars – the pre-briefing around the Budget has very much been that it is a case of getting the pain out now; that the government does not want to be seen ‘coming back for more’ each time.

Further, the wave of public investment in areas such as green technology and infrastructure could even unleash attractive opportunities for funds to co-invest on some projects. We will be keeping a watching brief on this.

Lastly, one of the key reasons for optimism in the wake of the Budget is a very simple one: it is now, finally, behind us. The very uncertainty around what was coming had been damaging business and consumer confidence in the lead-up to today. Now we know – everyone knows – and can begin to adapt and plan accordingly.

While today’s tax rises will undoubtedly count as a ‘debit’ on investors’ ledgers when considering the UK, there is still much to commend us: reasonable growth prospects; low unemployment; political stability and modest inflation. This is a good backdrop for the value imbued in the low ratings at which the FTSE is trading to begin to be unlocked.

Polling points to a change in government after 14 years, but there’s no reason for investors to worry.

Prime Minister Rishi Sunak surprised many political commentators by announcing a UK general election would be held on 4^th July. This is partly because opinion polls suggest that the opposition Labour Party, led by Keir Starmer, is currently on course for a comfortable victory (Labour leads the Conservatives by around 20 points on average). However, opinion polls are not always accurate, and sentiment can swing unexpectedly during the twists and turns of an intense election campaign.

Faced with increased political noise and the prospect of a new government, investors will undoubtedly be wondering what the election might mean for their portfolios. For longer-term investors, the short answer is probably “not that much” – evidence suggests that a UK election’s influence on market performance is typically short-lived and less significant than we might expect. Let’s look at three key reasons why we believe investors should remain calm in the run up to polling day. 

By Kel Nwanuforo

If at first you don’t succeed, try, try, try again. – W.E. Hickson

The Conservative Party’s struggle to turn around its enormous deficit in the opinion polls continues. Having tried a number of tactics – including steady-as-she-goes, ‘change option’ and ‘friend of the motorist’ – of late the Prime Minister has settled on ‘tax cutter’ to boost his political fortunes.

To this end, at last year’s Autumn Statement, Chancellor Jeremy Hunt was authorised/directed (delete according to your reading of events behind the scenes) to cut National Insurance contributions for employees by 2 percentage points.

The polls didn’t move.

In today’s Budget, Chancellor Jeremy Hunt was authorised/directed to cut National Insurance contributions for employees by 2 percentage points.

Try, try, try again.

Yes, the headline today was the cut in the main rate of National Insurance from 10% to 8% in April, coming hot on the heels of the prior cut from 12% in January.

Will it have the desired effect for the government this time? Taking both moves together, an average earner will save around £900 a year – a sizeable reduction in tax by historical standards. Yet the cuts come on the back of hefty tax rises, surveys find voters reporting gripes in several areas and the opinion poll gap has been stubborn for many months now. Time will tell.

Elsewhere, another key change concerned imminent reforms to the High Income Child Benefit Charge, which affects mid- to high-earners with children. The point at which benefit starts to be removed will shift upwards to £60,000 from the current £50,000 and taper away at a lower rate.

How are these giveaways to be funded? At least in part, through the abolition of the ‘non-domiciled’ tax status for wealthy overseas-based nationals. This was a crafty political move on Mr Hunt’s part, as this underpinned several of Labour’s own spending plans. Now that that money has already been spent, Keir Starmer will have to come up with a fresh plan.

See below for our full summary containing the other tax changes announced today.

Those with spare income to invest will welcome the Chancellor’s announcement of a new ‘UK ISA’ allowance of £5,000, additional to the standard £20,000 permitted each year. As the name suggests, this new supplement is intended to encourage investment into the FTSE. The relative listlessness of the home market has started to attract attention from the political class of late – and with good cause.

In recent years, the UK has attracted notably less interest from investors, fewer new companies listing and delivered lower returns than America, which dominates the global market and features heavily in Asset Intelligence portfolios. Today’s announcement represents one way by which the Chancellor hopes to reverse this trend – and as it presents an opportunity for savers to reduce their tax bills too, then so much the better.

Looking at the bigger picture, the news was largely positive, though do bear in mind that we were hardly starting from the sunlit uplands. The independent Office for Budget Responsibility expects inflation to fall below the government’s 2% target in a matter of months, a year earlier than previously expected. Meanwhile, the economic growth forecast for this year was upgraded from 0.7% to 0.8%, with next year’s figure up from 1.4% to 1.9%.

So – Rishi Sunak and Jeremy Hunt have tried and tried again. Will they succeed? Pretty soon, you decide.

Key measures announced for England (national variations for Scotland, Wales and Northern Ireland may apply)

Personal taxation

• The main rate of employee National Insurance is to be cut from 10% to 8% from 6 April – additional to the previous 2 percentage point-reduction which took effect in January
• Class 4 National Insurance – paid by self-employed people earning between £12,570 and £50,270 – is to be cut from 9% to 6% in April
• The High Income Child Benefit Charge will be assessed on the basis of household income, rather than on an individual basis at present, from April 2026…
•  … and in the meantime, from this April, the threshold at which it starts to be levied will rise from £50,000 to £60,000. Additionally, the taper rate will be halved – meaning people with incomes up to £80,000 will now retain some Child Benefit
  
  

Other taxation

• For disposals of residential property only, the higher rate of Capital Gains Tax will fall from 28% to 24% on 6 April
• The Furnished Holiday Lettings tax break will be abolished from April 2025
• The ‘non-domiciled’ tax status for the foreign income of overseas-based nationals is to be abolished, replaced by a new, less generous regime from April 2025
• Alcohol duty freeze extended until 1 February
• Fuel duty freeze extended for another year
• Air Passenger Duty for basic economy class flights will rise in line with inflation in 2025-26. For higher classes, the rise will be above inflation

Pensions and savings

• A ‘UK ISA’ allowance of £5,000 is to be launched for investment in UK assets, additional to the standard annual ISA allowance of £20,000
• New ‘British Savings Bonds’ will be launched by National Savings & Investments from April 2024. These will offer a fixed rate for three years
• A retail offer of part of the government’s holding in NatWest is planned for “this summer at the earliest”