Trump 2.0: Global Market Shocks You Can’t Ignore

As Donald Trump’s second term in the Oval Office approaches, global markets are bracing for a seismic shift. Since his economic strategy is already well established – tax cuts, deregulation and a return to protectionist policies – the question is not whether markets will react, but how.

The initial surge of optimism caused by Trump’s return will undoubtedly spark a rally in some sectors. But as investors have seen before, the long-term consequences of his policies are often unpredictable, and the broader market could face major turmoil.

The next phase will see both opportunities and risks that could significantly change the financial landscape from New York to Sydney and beyond.

Trump’s first term saw corporate tax cuts lift markets, but that initial euphoria could give way to rising inflation pressures in his second term.

The massive $1.5 trillion infrastructure plan he has pledged to reinvest in will undoubtedly boost demand in the economy – creating jobs, raising wages and putting more money in consumers’ pockets. On the surface, this should be good for business, right? Well, not so fast.

I believe inflation is likely to rise and will likely reach the 4-5% range by mid-2025. This will put upward pressure on prices, hitting both consumers and businesses. Inflation is not just a theoretical threat—it is a real problem that can seriously impact consumer spending and business operations as costs rise across the board.

And with the Federal Reserve already walking a fine line, rising prices will likely lead to further rate hikes, making borrowing more expensive and increasing market volatility.

For stocks, the impact could be mixed.

While industries such as energy, infrastructure and technology will benefit from deregulation and a favorable tax environment, other industries will face more pressing challenges.

Rising inflation will drive up resource costs, reducing profits and making it difficult for companies to meet profit targets. The result could be a more volatile stock market, especially in the second half of 2025.

A key pillar of Trump’s economic strategy is likely to be a stronger US dollar, thanks to a combination of fiscal stimulus, rising Treasury yields and global investors seeking safety.

On paper this sounds positive for the US economy, but the implications for the global market are much more complex.

While a stronger dollar could benefit American consumers by making imports cheaper, it would also create significant problems for American exporters. American products will become more expensive for foreign buyers, reducing the international competitiveness of American companies. Exporters, especially in the manufacturing and technology sectors, are likely to see reduced profits.

On the global stage, emerging markets will be hit hardest by a rising dollar, especially countries with heavy dollar-denominated debt such as Türkiye and Argentina. As the dollar strengthens, these countries will face higher debt repayment costs, potentially leading to economic instability and market sell-offs.

In fact, global capital flows could be seriously disrupted as investors flock to U.S. assets for safety, leaving emerging markets vulnerable to greater volatility.

The president-elect’s commitment to protectionist trade policies, including a renewed focus on tariffs, could have an even more profound impact on global markets. Trade wars were a defining feature of his first term, and it is unlikely that his second term will be any different.

With Europe and China already on high alert, retaliatory tariffs could trigger a new round of disruption to global supply chains.

This could be detrimental for US stocks. Companies with significant international presence, especially in sectors such as technology, automotive and retail, will bear the brunt of increased trade tensions.

Higher production costs due to tariffs will eat into profits, and rising consumer prices will reduce demand, leading to slower economic growth. In industries like technology that rely on global supply chains, stock prices could suffer as production costs rise.

The prospect of a protracted trade war has been largely underestimated by many market analysts, and the US market may not be prepared for its consequences. It’s not just foreign stocks that will suffer. U.S. companies that rely on European and Chinese markets are equally vulnerable to retaliatory tariffs, and their valuations, which are currently high, could quickly become a liability.

In an environment of rising inflation and interest rates, bonds may seem like a safe bet, but they can come with their own challenges. As yields rise in response to fiscal stimulus and potential rate hikes, bonds, especially longer-dated ones, may lose some of their appeal.

However, despite the volatility, US Treasuries remain a relatively safe asset as demand for US government debt will remain strong – especially as global capital seeks a place to weather economic storms.

Bonds can also provide a cushion for investors during periods of increased volatility. While they won’t offer the same high returns as stocks or cryptocurrencies, they could be a good option for those looking for more stability as the market braces for turbulence related to Trump’s economic agenda.

If the stock market faces growth problems due to Trump’s policies, there is one asset class that is likely to thrive: Bitcoin and other cryptocurrencies. Thanks to his pro-crypto stance and growing institutional interest in digital assets, cryptocurrencies will get a boost.

A Trump presidency could be a major catalyst for Bitcoin, pushing it well beyond its current price of $96,000 to new all-time highs. Bitcoin is increasingly becoming a mainstream asset.

Its support for digital currencies and regulatory clarity will accelerate adoption. Investors looking to diversify away from traditional assets can be expected to turn to the world’s largest digital asset as an alternative store of value, further boosting its value in 2025.

Only time will tell exactly how he will respond, but investors should brace for a year of volatility as markets adjust to the realities of Trump’s re-election.

Nigel Green is the CEO and founder of deVere Group.