As the political landscape in the United States shifts with Donald Trump's return to the presidency, financial markets are responding in dynamic ways. This article explores the contrasting reactions across US and Europe equities, highlighting the notable ascent of US stocks, the strengthening of the US dollar, and the challenges facing European equities. ETFs exposed to the United States have progressed by 4.69% this week (as of Thursday evening), recording significant positive flows of €3.5 billion. Meanwhile, European ETFs have seen a slight downturn of 0.34% over the same period, managing to collect only €82 million in inflows.
US Stocks Reach New Heights
U.S. stocks soared this week, hitting record highs as Donald Trump secured victory in the 2024 presidential election. The Dow Jones Industrial Average made headlines with a powerful 3.99% surge, closing at an all-time high. The S&P 500 and Nasdaq Composite followed suit, jumping 4.26% and 5.64%, respectively, and marking their own historic peaks.
Stocks speculated to benefit from Trump’s policies—such as Tesla—rallied with remarkable gains (+19.25%). Bank stocks also saw a lift, with JPMorgan Chase (NYSE:JPM) climbing 6.03% and Wells Fargo (NYSE:WFC) rising 7.95%. Small-cap stocks, represented by the Russell 2000, surged 7.81%, benefiting from a market leaning toward domestic and cyclical growth.
Investors are increasingly optimistic that Trump’s agenda—focused on cutting corporate taxes and pro-growth industrial policies—will fuel the U.S. economy, potentially driving continued gains in U.S. risk assets.
Dollar Rallies on Trade Ambitions
The U.S. dollar is on a strong upswing following Trump’s victory, as anticipation builds around his bold trade policy agenda. Buoyed by plans for substantial tariffs on imports, the dollar is gaining ground against a range of currencies from developed and emerging markets alike. This protectionist push has ignited excitement among investors, with the dollar poised for further momentum as these trade measures develop.
European Markets Hit Roadblocks
Across the Atlantic, European markets tell a different story. Despite an initial rise, European equities have faltered since Trump's win, with the Stoxx 600 index slipping by 0.19% as most sectors closed in the red. Concerns loom over the potential for EU retaliation if Trump’s tariff plans materialize, raising the specter of a trade conflict that could impact both European and emerging markets. Uncertainty casts a shadow on sectors like luxury goods, automotive, and manufacturing, all of which are bracing for possible headwinds.
US and European ETFs Performance
In the ETF landscape, U.S. small-cap funds led the charge, with the iShares S&P Small Cap 600 UCITS ETF (LON:IDP6) and SPDR® Russell 2000 US Small Cap UCITS ETF (LON:R2US) soaring by 8.27% and 8.10%, respectively. Meanwhile, U.S. large-cap funds drew the largest inflows, as the iShares Core S&P 500 UCITS ETF (SIX:CSSPX) amassed €536 million in new investments this week.
In contrast, European ETFs faced challenges, especially in healthcare and banking. The Amundi UCITS Stoxx Europe 600 Health Care ETF (ETR:LHTC) and the Amundi UCITS Stoxx Banks C-EUR ETF (LON:BNKE) dropped by 3.00% and 2.19%, respectively. The broader Euro Stoxx index also saw declines, with the Invesco EURO STOXX 50 UCITS ETF (SC0D) down by 1.59%.