Economic Shifts on the Horizon: The U.S. Presidential Elections Result in Trump's Victory

The U.S. Bank article highlights the impact and influence that the U.S. presidential elections has on the stock market trends. It emphasizes both the short-term and long-term effects. Due to the fact that the election year usually possess uncertainties over possible changes to trade, tax, and economic policies, it increases investor concerns. Hence, resulting in the markets being more volatile during election years. Stable policy direction is often preferred by the market, which may reduce volatility in the event that the incumbent party wins. However, other economic factors and trends tend to have a greater role and more lasting impact on the market performance as compared to the election cycle. Election years have historically seen an increase in the market, especially once the results are known and the uncertainty subsides. (U.S. Bank, 2024)

As reported in the article, the U.S. stock market saw tremendous gains a day after the election results were announced. It was seen that the Dow Jones Industrial Average, S&P 500, and NASDAQ Composite Indexes generated dramatic gains and reached an all-time high. The yield on 10-year U.S. Treasury securities increased sharply on the first trading day following the election, while fixed income markets saw a decline. (U.S. Bank, 2024)

But does the U.S. presidential elections impact the Malaysian economy? 

It is anticipated that protectionist trade policies, including import taxes, will be fueled by Donald Trump's return to the presidency of the United States. This could have an effect on Malaysia's export-driven economy, especially the electrical and electronics (E&E) sector. As a net exporter to the United States, Malaysia can experience an increase in export expenses. Multinational corporations may relocate their operations back to the United States as a result of proposed tax cuts for domestic manufacturers in the United States, which could lower manufacturing investments, employment, and tax revenues in Malaysia. Policymakers in Malaysia are keeping a careful eye on these developments. (Star, 2024)

On a positive note, due to supply chain diversification brought on by Donald Trump's tariffs on Chinese goods, Chinese companies and investors are increasingly interested in shifting their operations elsewhere such as Malaysia. In the past, the policies enforced by Trump encouraged foreign investment in the Southeast Asia region. This benefitted certain industries such as the manufacturing and semiconductor industries. Thanks to Malaysia’s neutral stance and the U.S. trade connections, Chinese corporations have been showing an interest in Malaysian industrial parks. It was also observed that Malaysia has witnessed significant foreign investments since the start of the trade war in 2018. Another impact brought on by the trade war is that the Malaysian exports to the United States have grown faster than those to China. (Azmi, 2024)

The Malaysian central bank, known as Bank Negara Malaysia has stated in an email that it "closely monitors global developments, including the U.S. elections, that could affect the financial markets." BNM further stated that it was ready to control any market volatility in order to maintain stable market conditions in the country. (Ngui, 2024)

BNM also mentioned that "Malaysia's highly diversified economic and trade structure, along with its strong fundamentals and positive growth prospects, will provide ample buffers to navigate external uncertainties,". (Ngui, 2024) 

Written by:

Kareena Kaur Boparai,

3rd Year Student at Taylor's University,

Bachelor of Business (Honours) in Finance and Economics. 

References:

U.S. Bank (2024) ‘How presidential elections affect the stock market’, 7 November. Available at: https://www.usbank.com/investing/financial-perspectives/market-news/how-presidential-elections-affect-the-stock-market.html (Accessed 11th November 2024)

Ngui, I. (2024) ‘Malaysia central bank set to manage market volatility, monitoring US election’, Reuters, 7 November. Available at: https://www.reuters.com/markets/asia/malaysia-central-bank-set-manage-market-volatility-monitoring-us-election-2024-11-05/ (Accessed 11th November 2024)

Azmi, H. (2024) ‘With Trump’s victory, Malaysia sees more interest from Chinese firms for business space’, myNEWS, 12 November. Available at: https://www.scmp.com/week-asia/economics/article/3286205/trumps-victory-malaysia-sees-more-interest-chinese-firms-business-space?module=perpetual_scroll_0&pgtype=article (Accessed 12th November 2024)

Star (2024) ‘Tax Matters - How the US election outcome affects Malaysian businesses’, 11 November. Available at: https://thesun.my/business-news/tax-matters-how-the-us-election-outcome-affects-malaysian-businesses-AG13264646 (Accessed 12th November 2024)