Trump makes Wall Street soar. Why European stock exchanges are more at risk
Tariffs and a return of inflation could pose risks for the Old Continent's stock markets
by Morya Longo
3' min read
3' min read
On one point many already agreed on the eve: for Wall Street whoever won would potentially be a success. For that has always been the case. Even in the recent past: during Donald Trump's tenure between 2016 and 2020 Wall Street gained 57.5%, during the Biden presidency the rise was 71%.
And even in the short term, even with heightened volatility at times, this was more or less always the case. But also on another point they all agreed: in the immediate term, Trump's victory would please Wall Street more than Kamala Harris's. Because corporate tax cuts (which Trump will keep when they expire in 2027) and deregulation appeal to the stock market. It is no coincidence that as soon as Wall Street realised that Trump would be the new occupant of the White House, futures on the S&P and Nasdaq indices literally flew high. And even better are the small caps, the medium-sized companies: that is to say, the ones most benefited by the America First policy. Not to mention Bitcoin.
On the other hand, uncertainty is greater for European stock exchanges: with Trump's victory it could be the Old Continent's stock markets that suffer. It is no coincidence that in October, with investors trying to bet on Trump, European stock exchanges lost ground (-1.7%) and Wall Street rose (+1.04%). And it is no coincidence that already on Wednesday, at the first indications coming from the US polls, futures on the European stock exchanges were immediately weak at the pre-opening. Then, when the stock exchanges opened, they turned heavily negative after an initial rise.
The three risks for Europe
.For the Old Continent's stock markets, there are three potential problems with Trump in the White House. Europe is an exporting continent, with two of its main economies devoted to exports (Germany and Italy): a possible increase in duties and a cooling of global trade would have a negative impact on the economy and therefore on the stock market. Even Kamala Harris would not be soft on duties, after those already launched by Biden against China, but with Trump the risks of escalation in the trade war are greater.
Inflation risk
.The second risk is related to inflation. Trump's policies have a potential inflationary impact in the US (so much so that many think the Fed will have to slow down the rate-cutting path) but also in Europe. For two reasons: the first is related to tariffs, which - obviously - have the effect of raising prices. The second is related to the possible appreciation of the dollar against the euro (already visible in the morning after the vote): since Trump's fiscal policy has the effect of driving up deficits and debt, and this has - in turn - the effect of keeping US government bond yields high, the dollar could continue to strengthen as a result of capital flows, which always tend to go where yields are highest. Many economists predict this. Not all of them, however: the Ubs team, for example, predicts that the greenback will tend to depreciate in the future. But most of the market thinks the opposite. It is a fact that a strengthening of the dollar would mean, for Europe, paying more for oil and raw materials. Therefore potential imported inflation, offset, however, by falling commodity prices themselves.
