Agefi Luxembourg - novembre 2024

Novembre 2024 31 AGEFI Luxembourg Fonds d’investissement Opinion - By Johan Van GEETERUYEN, CIOFundamental Equity at DPAM A s a secondTrump termap- proaches, financialmarkets, investors, andpolicymak- ers are closely analysing its impact on the economy,monetarypolicy, and specific sectors. The legacy of Trump’s first term(2016–2020) pro- vides valuable insights into whatmayunfold in an- other term, but unique fac- tors in the current economic climate - such as inflation, geopolitical ten- sions, and energymarkets - also contribute to this complex outlook. This article examines the potential economic shifts, keypolicies, andmarket re- actions associatedwith aTrumpvictory, as well as the expected impacts on sectors such as energy, technology, andfinance. Market outlook In Trump’s first term, U.S. yields rose between 2016 and2018,mainlyduetoastrengtheningeconomyand the Fed’s tightening cycle. Securing a second term, marketsmightexperiencerenewedupwardpressure on yields and the dollar, reflecting confidence inU.S. equitiesandeconomicgrowthbutalsoduetothepo- tential inflationary impact of his programme. Notably, small-capstocks andfinancials are likely to benefit, following trendsobservedafter the2016vic- tory. Historically, themarket performed strongly in both the 2016 and 2020 elections, with gains across technology and financial sectors. Trump’s victory couldbring furthermomentumtocyclical stocks (fi- nancials, energy, etc.),with technology, defence, and traditional automakers potentially gaining as well. While market volatility was high during Trump’s initial victory, his repeat win would reduce the ele- ment of surprise, potentially resulting inmore stable financial markets. Keep in mind, the Fed and the profit cycle matter more for the markets than the election itself. Obvious sectors to watch are renew- ables/energy, electric vehicle adoption, healthcare services, defence, etc. Fiscal outlook: deficits and tax policies The fiscal position of the U.S. has deteriorated under successive administrations, and Trump isunlikely toprioritise strict fiscal discipline. In 2017, Trump implemented significant corpo- rate tax cuts, a boost for U.S. businesses.A sec- ond termis less likely to featuremajor tax cuts, thoughaRepublican-controlledCongressmay attempt to extend the 2017 Tax Cuts and Jobs Actbeyondits2025expiry.A“redsweep” (Republican control of both theWhite House and Congress) will likely lead to upside risk for rates near-term, driven by poten- tial spending increases and tax cut extensions and result- ing increases in Treasury is- suance. Economic policies Energy policy : Under Trump’s “drill baby drill” ap- proach, U.S. oil and gas producers could see favourable conditions, especially as his policies focus on fossil fuels. While U.S. oil production has reached record highs under Biden-Harris, a Trump adminis- tration might increase production even further throughderegulation and increaseddrillingpermits. MorefocusonoilandgasexportcouldbenefitEurope as long as it needs large amounts ofU.S. LNG. How- ever, global factors like Saudi Arabia’s production strategiesanddemandshiftsmayplayamoresignifi- cant role in shaping the energy landscape. Renewables and clean energy : Trump has histori- cally opposed policies favouring renewable energy, but his stance couldbemoderatedbypragmatic con- siderations, especially if energy demand from theAI sector rises. SinceElonMusk startedbackingTrump, his stance on electric vehicles has softened. Also, full IRA repeal is unlikely, given Republican congres- sionalsupportforcertainprovisions.Increasedtariffs on imported clean energy equipment could tem- porarily disrupt renewable energy projects but may also encourage domesticmanufacturing investment. Technology and big tech scrutiny : Trump has oc- casionally criticised Big Tech’s influence and hinted at regulatory actions, but his stance remains com- plex. There is potential for further scrutiny of domi- nant technology companies, especially regarding socialmedia anddataprivacy. Trump’s administra- tion could see tighter restrictions on international technology partnerships, particularly those with China, to safeguard U.S. technological leadership. His relationshipwith influential techfigures, includ- ingElonMusk, hints at possible support for domes- tic techmanufacturing, even if regulatory pressures on Big Tech continue. Trump’s inclination towards light regulation and reduced oversight could ulti- mately benefit the technology sector in the longer run. However, his aggressive approach could con- tribute to increased volatility in tech stocks as in- vestors react to policy shifts. Financial sector and banks : A Trump-led adminis- trationwouldlikelyrelaxregulatoryrequirementson banks, particularly under Basel III standards. Dereg- ulation could enhance bankprofitability, especially if risingratesboostbankearningsthroughhigherinter- estmargins.Financialsmayoutperformothersectors, asTrump’spoliciescouldfavourdomesticoverinter- nationalcompetition,benefitingU.S.-centricfinancial institutions over global banks. Manufacturing and trade policy : Trump’s first term sawaggressive tradepolicies, including tariffs target- ingChinaandEurope.Inasecondterm,wemightsee even higher tariffs, with a focus on reducing reliance onChina formanufacturing. Tariffs rangingbetween 10–60%on imports fromChina coulddisrupt supply chains, impacting U.S. companies reliant on foreign productionwhile encouraging domestic investment. Earnings drag for importers will be somewhat miti- gated by a shift away fromChina during the last six years. Trade tensions could result in a stronger U.S. dollar, affecting the profitability of exporters. In the short term, higher tariffsmayhurt small-cap compa- niesmore than large corporations, as they oftenhave less flexibility in adjusting their supply chains. Monetary policy and the federal reserve Under Trump, the Fed may face indirect pressures, but overall, his administration has generally main- tained a hands-off approach. Trump’s influence on the Fed may be strengthened by a supportive Congress. A Trump administration might favour a moderately hawkish Fed, aiming to contain inflation while supportinggrowth.His victory couldalso lead to slightly tighter monetary policy conditions, espe- cially if hispoliciesdrive inflationhigher through tar- iffs and trade restrictions. In this case, investors could expecthigherlong-termrates,withtheFedbalancing growth concernswithprice stability. Foreignpolicy and geopolitical risks The ongoingU.S.–China rivalry is poised to intensify under aTrumpadministration. Escalating tariffs and traderestrictionsmayhaveadverseeffectsoncertain sectors, particularly those dependent on imports from China, such as consumer electronics and tex- tiles. Trump’s policies may also impact European companieswithsignificantU.S. exposure, especially in theautomotive sector.GermanandEuropeanau- tomakers, for instance, could face new import taxes, favouringAmerican competitors like FordandGM. Defence spending is expected to remain robust under a Trump administration, especially with on- going geopolitical uncertainties. U.S. defence com- panies may benefit from increased spending, while Europeancounterparts could face competitivepres- sures in the U.S. market. Key risks anduncertainties Fiscal uncertainty anddebt ceiling: The debt ceiling and federal budget remain crucial areas of risk. Budget negotiation could result in a government shutdown, increasing market volatility. If the debt ceiling suspension expires in January 2025, a swift resolution would be essential to avoid fiscal crises. Trade disruptions and inflation: If Trump pursues high tariffs on imports, particularly fromChina, in- flation could rise, forcing the Fed to adopt a hawk- ish stance. Elevated tariffs may also dampen consumer demand due to higher prices, affecting sectors such as retail andmanufacturing. Big tech regulations: Further restrictions on Big Tech could impact stock prices, especially in com- panies heavily reliant on advertising and social media. Although Trump’s relationship with tech leaders is complex, regulatory scrutiny ondata pri- vacy, market competition, and international part- nerships may persist. Conclusion AsecondTrump termbrings bothopportunities and challenges for the U.S. economy and financial mar- kets. Key areas of impact include fiscal policies, trade and tariffs, sectoral performance, andmonetary pol- icy. Investors may look towards cyclicals (financials, energy,etc.)andcertaintechnologycompaniesaspo- tentialbeneficiaries,whiletariffsandgeopoliticalten- sions pose risks to specific sectors. Ultimately, Trump’s policies may foster a favourable environ- ment for U.S. equities, especially if deregulation, do- mestic manufacturing, and tax policies create incentives for growth. However, headline risks— ranging from fiscal uncertainties to trade disrup- tions—could create periods of volatility, impacting bothdomestic andglobalmarkets. Four more years of Trump: what does it mean for the markets? DepoBankDay: ADeep Dive into Funds Custody Law O n 1October 2024, Baker McKenzie Luxembourg held its first DepoBank Day event bringing together over 120market stakeholders, includ- ing the regulator, heads of deposi- tary services, bank and custody experts to engage inmeaningful discussions about custody and fund depositary laws and the es- sential duties and liabilities of de- pository banks. Laurent Fessmann, Investment Funds leader at Baker McKenzie Luxembourg and the event's master of ceremonies, kicked off the conference by quoting the official EU Commission spokespersons in the aftermath of 2010 financial crisis: “Toomany failures, toomanynegligence were committed, YOU (depositaries) are the stakeholderswhichhave to takeback control over the funds operating pro- cesses. YOU(depositaries) are the servic- ing providers which are able to restore investor confidence”. This half-day seminar provided a valu- able platform to learn more about the state of the ongoing supervision of ap- pliedby theCommissiondeSurveillance du Secteur Financier and fact findings gathered following the insite inpesctions. The regulatorwas also queried on recent public release relating to the ex-ante con- trols for depositaries. ABBL gave a pre- sentation of its new guidance paper on the depositary look-through duties and ALFI presented the post trade reduced settlementcycle(T+1).Headseadsofcus- tody and depositary services had the oc- casion to expand and on their daily duties, liabilities andpractical challenges. With its impressive lineup of very senior andexpert speakers formdepositaryand global custodians and thought-provok- ing discussions, DepoBank Day offered a unique opportunity for Luxembourg depositaries to connect, collaborate, and learn fromeach other. Given the success of the event, there is a great likelyhodd that Baker McKenzie may decide to continue this expert dia- logue session during a second edition next year. ©BakerMcKenzie Par Vincent JUVYNS, Global Market Strategist, J.P. Morgan Asset Management C es quinze dernières années, la France, comme la plupart des États euro- péens, a dû soutenir son économie «quoi qu’il en coûte» à plusieurs reprises. En 2008, tout d’abord, lorsqu’elle a dû secourir ses banques en difficulté en raison de la grande crise financière. En 2020, ensuite, lorsque la pandémie de Covid-19 l’a obligée à soutenir ses entreprises, dans l’impossibilité de continuer leurs activités. En 2022, enfin, elle a dû protéger ses entreprises et lesménages de l’augmentationdes prixde l’énergie induite par la guerre en Ukraine. Si, contrairement à ce quedisent aujourd’hui lesCassandres, soutenir l’économie «quoi qu’il en coûte» était absolument indispensable, cela a néanmoins entraîné une aug- mentation significative de l’endettement public. La dette de la France a en effet plus que doublé de- puis 2008 pour atteindre plus de 3.000 milliards d’euros en 2024, soit 112% du PIB, ce qui est trop élevé. Ainsi, bien que le «quoi qu’il en coûte» ait permis au gouvernement de protéger la popula- tion française et de sortir l’économie de la spirale déflationniste, il s’agit d’une «victoire à la Pyr- rhus» dont on commence seulement aujourd’hui à mesurer le vrai coût. En effet, si la France a pu s’endetter jusqu’ici sans problème, c’est grâce au fait que les règles budgé- taires européennes ont été temporairement levées et que la baisse des taux de la Banque Centrale Eu- ropéenne a permis de contenir le coût du service de la dette, mais cela est en train de changer.Ainsi, avec un déficit dépassant les 6% du PIB en 2024, la France fait aujourd’hui l’objet d’une procédure de déficit excessif de la Commission Européenne, ce qui l’oblige à se serrer la ceinture. C’est d’autant plus important qu’en raison de la remontée des taux d’intérêt, la charge de la dette devrait passer de 55milliards d’euros en 2024, soit davantage que le budget de la Défense, à plus de 80 milliards d’euros (1) en 2027. Il faut donc rapidement stopper l’hémorragie, mais il ne faut pas que le remède soit pire que la maladie. Il n’y a évidemment pas de formule mi- racle, mais dans un pays parmi les plus taxés au monde et où les prélèvements obligatoires attei- gnent déjà 45%du PIB, une augmentation impor- tante de la fiscalité n’est pas souhaitable, d’autant plus qu’elle risque de peser sur les investissements des entreprises. En revanche, avec des dépenses publiques qui sont passées de 55%du PIB en 2019 à 57% (2) en 2023 (contremoins de 50%enmoyenne dans l’Union Européenne), il y a incontestable- ment de lamarge pour réduire les dépenses. C’est absolument nécessaire au nom de la justice inter- générationnelle, afin que nos enfants n’héritent pas d’une dette ingérable, au nomde la justice so- ciale, car c’est le seul moyen de protéger lemodèle social français et enfin au nom de la défense de notre souveraineté, si l’on ne veut pas se faire dic- ter nos politiques budgétaires par d’autres, sa- chant que la dette française est détenue à 54% (3) par des investisseurs étrangers. 1) Source: Cour des Comptes 2) Source: Eurostat, The Economist 3) Source: IMF, Sovereign Debt Investor Base for Advanced Economies, juin 2024 Le coût du « quoi qui l’en coûte »