Will history repeat itself with capital markets and Trump 2.0?

Analysis of the latest and historical investment data has delivered some clarity amid the chaos, says Janus Henderson Investors, and has helped shape the manager’s optimism about capital markets in 2025.

Head of Global Asset Allocation and Portfolio Manager, Ashwin Alankar, said outcomes of policy changes and adjustments during Donald Trump’s second administration will be a “determining factor” in capital market performance, as historical performance during Trump’s first term could not be expected to repeat itself – “this would make investing way too easy”.

Alankar cited three areas where certain similarities and differences are expected in market performance between Trump’s first and second administration, including global equities, fixed income and currencies.

“Where are assets likely to perform similarly to Mr. Trump’s first year as president and where could performance diverge this time around? We all know global equities performed exceptionally well when Mr. Trump was first elected president back in 2016. Ironically, despite tariffs, despite other protectionist policies, non-US equities in fact outperformed US equities.

“But, unlike today, back then, non-US countries were showing clear signs of strong economic rebound. So, while we expect equities in general to perform well in the medium term, coming into the new year, we expect US equities to lead the pack and to be a more attractive place to source equity risk premium.

“Another point of departure is, we also do expect lower-volatility, higher-stability stocks to shine as we are much later in the business cycle today than we were back in 2016.”

Alankar also warned of significant interest rate volatility as Trump enters his second administration, as similarly seen during his first ever year as president.

“Moreover and more importantly, we also expect there to be greater upward pressure to interest rates today than previously because Mr. Trump’s pro-growth policies represent a much greater and significant threat to inflation this time around.

“It is much easier to ignite inflation when the memory of rising prices is still fresh in consumer’s minds, just like it is today. We believe the risk to higher rates is more severe here in the US than outside of the US, given lacklustre growth we expect in other regions.

“Lastly, on currencies, unlike 2017, where the US dollar rally lost steam, we expect dollar strength to continue throughout most of 2025 as economic growth outside of the US is not the bright spot that it was back in 2017.

“Furthermore, the US administration’s pro-growth policies will likely delay interest rate cuts and accommodation by the Federal Reserve, lending further support to a strong US dollar.”