Daniel Casali, chief investment strategist at UK wealth manager Evelyn Partners, shares his insights on the impact on markets of potential policy changes from US president Donald Trump.

Daniel Casali at UK wealth manager Evelyn Partners has argued that 2025 will see relatively solid global economic growth, policy easing and further technological innovation. 

“On growth, Bloomberg’s survey of economists forecast global real gross domestic product (GDP) to expand by 3 per cent in 2025, roughly in line with the long-term average,” Casali said in a note this week. “Leading the way is the US economy, where Trump is likely to bring in tax cuts and introduce significant deregulation.” 

Other wealth managers, such as Standard Chartered, Northern Trust Asset Management, UBS Global Wealth Management, Pictet Asset Management and Goldman Sachs Asset Management also favour US equities in 2025. See more commentary here and here. January is a traditional time for firms to explain asset allocation and forecasts. In general, the mood appears to be one of cautious optimism on equities, coupled with concerns about the impact of US tariff hikes as a new US administration takes office, as well as the stickiness of inflation in parts of the West.

Casali outlines below 5 Top Trump Cards for investors to consider as the US welcomes its new president. 

Equities set to outperform government bonds  
Economic expansion and growth of company earnings provide a central reason to prefer equities, rather than bonds. Furthermore, available shares are becoming scarcer when compared with bonds. Morgan Stanley estimates that from 2000 to 2023 US public companies issued around $10 trillion in shares but retired around $14 trillion. In contrast, there is a rising supply of government debt with few politicians in developed economies willing to tackle the unpopular decision to reduce social welfare costs. 

Exceptional US equities to continue 
The strength and vibrancy of the US economy, along with innovation in the tech sector, has driven US company earnings and market performance over the past decade. Since the global financial crisis in 2008, US-listed companies have, on average, grown reported trailing earnings per share (EPS) by around 6 per cent per annum more than non-US peers. Aside from earnings, US firms have also demonstrated a shareholder-friendly focus. The return on equity (defined as net income over shareholders capital) is nearly 16 per cent for the US, but only around 11 per cent for non-US equities. In other words, US firms tend to use shareholders’ funds more effectively than their peers, the note said. 

Selected cyclical sectors to remain in favor  
Casali’s proprietary methodology considers global equity market sectors thorough a factor-based lens. He evaluates the prevailing macro environment, along with valuation, price momentum and risk for all the companies within each sector. This data-led process leads him to favor some of the more cyclical areas of the market, such as financials and real estate which look inexpensive and are exhibiting good price momentum. Industrials and the consumer discretionary sector also look attractive on a valuation basis. 

Gilts take preference over treasuries 
In 2025, Casali expects central banks to continue their easing cycles as they consider nudging inflation back toward the 2 per cent target while avoiding an economic slowdown. Much will depend on the economic policy agendas of new administrations in the US and UK. He thinks that Trump’s policy agenda is likely to be more expansionary compared with the policies pursued by the Labour party in the UK. If Trump follows through on his stated aim of imposing tariffs on trading partners, then this could lead to higher inflation. With gilts also trading cheaply compared with US treasuries, Casali currently prefers them over treasuries. 

Join the gold rush  
The gold price has been lifted by official purchases in emerging economies following Western financial sanctions against Russia in 2022. In addition, gold may offer investors portfolio protection against downside risks. When interest rates rose in 2022, both equity and bond prices fell, but the gold price was roughly stable during this time. The need for assets in a portfolio which are uncorrelated to equities adds another layer of demand for gold. Ultimately, increased demand for bullion has offset the opportunity cost of owning a zero-yielding asset, like gold, even though interest rates have gone up. 

However, Casali highlighted that there are some risks to consider too. There are potential pitfalls that investors need to be wary of in the months ahead. Three areas to be mindful of include: 

1. Bond market uncertainty 
If US economic growth and inflation surprises on the upside, interest rates might not fall as expected. The US Federal Reserve might even have to tighten again. Treasury yields could then rise, possibly leading to price volatility within the broader bond and stock markets. An ongoing concern is whether investors will continue to refinance mounting government debt. 

2. Market concentration risk 
The market value of the "Magnificent Seven" stocks – Tesla, Apple, Amazon, Alphabet, Nvidia, Meta Platforms and Microsoft – has risen to a record 35 per cent of the US S&P 500, lifted by buoyant expectations of growth within the artificial intelligence theme. Should investor enthusiasm for AI deteriorate, it could lead to a sell-off in US and global equity markets.  

3. Geopolitics 
It remains unclear how geopolitical tensions under an isolationist Trump administration will fare. Trump has said that he intends to broker a truce in the war between the Ukraine and Russia, but he could initially escalate tensions with China through trade tariff hikes. To distract from the economic malaise in China, President Xi could react with a blockade or invasion of Taiwan. Trump’s inbox also includes tackling flare-ups in the Middle East. Global markets will be especially sensitive to any event that disrupts the supply of oil and gas from the region.