ODDO BHF Experts' Insights
This month, our experts analyze, among other things, the implications of Donald Trump's victory in the U.S. elections on November 6th:
Bruno Cavalier explains how Trump's return could, despite his intentions to stimulate growth, lead to increased inflation and reignite trade tensions. He warns against the risk of undermining the Fed's independence, which could destabilize the markets. Laurent Denize analyzes China's massive 10 trillion yuan stimulus plan to support its economy amid uncertainties. He questions the effectiveness of this "bazooka" and its potential impact on markets and the European industry. Jan Viebig examines the challenges of the next German government after the collapse of the current coalition. He anticipates that a government led by the CDU might seek to boost competitiveness, even if structural problems won't be resolved immediately.
Dive into our experts' analyses to navigate this new reality!
The Economic Consequences of Donald Trump
By Bruno Cavalier, Chief Economist, ODDO BHF
The inflation shock that occurred under Joe Biden’s presidency weighed heavily on the Democratic camp and discredited it during the U.S. elections on November 5th. Over the past four years, inflation has averaged 5% annually, peaking at nearly 9%. This is more than double the normal trend of recent decades. Consequently, voters predominantly chose the Republican camp, which ensured Donald Trump a landslide. Paradoxically, his economic platform is, at first glance, the most inflationary.
Economically, Donald Trump's core ideas are the same as eight years ago, but this time he is better prepared to implement them. In 2016, his victory surprised even his campaign team, which had no plan in forming the future government. Donald Trump had presented himself as a candidate outside the ‘system’, but the main positions in his administration had gone to traditional Republicans. This setting helped counterbalance the sometimes-radical ideas of the 45th President of the United States. In 2024, the picture looks entirely different. Donald Trump has reshaped the Republican Party at his own discretion and led it to victory, thereby creating dependencies among newly elected officials. The initial appointments of the future 47th president reveal his intent to surround himself with loyal individuals aligned with his views. Although this doesn’t rule out competence, it cannot be guaranteed in all areas...
Monthly Investment Brief - China's bazooka versus Trump's victory
By Laurent Denize, Co-Chief Investment Officer, ODDO BHF
On November 6, the U.S. election saw a sweeping victory for Trump, implying rising uncertainties for China and the world. On Friday, November 8, 2024, China’ s National People's Congress Standing Committee concluded in Beijing and unveiled a 10-trillion-yuan ($1.4 trillion) stimulus to aid local governments, the boldest one since pandemic. Is this level of support sufficient?
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Trump 2.0 - implications for China
Trump's return to the White House signals the potential restart of the U.S.-China trade war. Higher tariffs and more trade restrictions could impact Chinese export-oriented sectors. The yuan may also face depreciation pressure to counter reduced external demand.
However, the effects of this round of tariffs hike might differ from the disruption seen in 2018. First, the U.S. share of China’s exports has dropped from 19% in 2017 to around 14% by the end of 2023, with China actively expanding markets outside the U.S. and relocating production lines to other countries to mitigate tariff impacts. Second, China will more proactively deploy counter-cyclical fiscal and monetary policies to cushion the economic blow. November 8th, 2024, China’s Finance Minister Lan Fo’an promised a “more forceful” fiscal policy for next year, signaling bolder steps may follow Trump’s inauguration in January. Third, Trump’s approach tends to be “transactional”. Thus, the extent of tariff increases could well be the result of negotiations between the two nations.
The November 6 election result is only the first step. The situation will become clearer once the new president assumes office in January 2025 and selects key members for the policy team.
The economic policy challenges of the next German Federal Government
By Prof. Dr. Jan Viebig, Co-Chief Investment Officer, ODDO BHF
Continuing differences of opinion, particularly on economic and budget policy, had long worn down the traffic-light coalition – named after the colors of the participating parties - in Berlin. The coalition's breakup was triggered by an economic paper from FDP Finance Minister Christian Lindner, which the SPD and the Greens had to take as a challenge – and which was presumably intended as such: postponing of climate targets, restrictions on social spending, reduction of corporate tax, abolition of the solidarity surcharge, adherence to the debt brake, and curbing bureaucratic costs were the "bitter pills" the Federal Chancellor was no longer willing to swallow. The dismissal of Christian Lindner as finance minister ended the unpopular coalition. Federal Chancellor Olaf Scholz is expected to ask the question of confidence on December 16, thus paving the way for the dissolution of the Bundestag. According to current plans, new elections are scheduled on 23 February 2025.