The US has elected former President Trump as its next President.
The presidential election results were clear and timely, and the outcome was accepted by all. Markets were braced for a potentially contentious, disputed process and prolonged uncertainty while cities prepared for volatile demonstrations. In the end, fears of unrest did not materialize, and markets rallied in relief over the air of certainty surrounding the presidential transition.
Beginning in January, Republicans will have small majorities in both the Senate and the House. A sweep of this nature typically enables major policy changes in the early part of a Presidential term, as was the case in 2020 when Democrats held the Presidency, the Senate, and the House. The implications, however, are elevated this time because of several campaign promises with consequences for fiscal, labor, and trade matters. Market analysts are focused on the most probable and imminent economic effects while noting the potential impact on institutions, the environment, and human rights.
US Investment Strategies
Heading into the political transition, the US economy is resilient, running at a 2.5% real GDP growth trajectory likely to persist into next year. We see the election resulting in a few potential economic puts and takes. Proposed deregulation and tax cuts could modestly improve GDP growth. We also expect the US Dollar to strengthen with inbound capital flows; this could moderate interest rates and input costs. On the flip side, proposed tariffs and immigration policy could lower economic growth and these changes could disrupt supply chains and rekindle inflation. There is also increased potential for changes to major fiscal initiatives like the Chips Act and the Inflation Reduction Act. While this may lead to near-term market disruption, these programs’ economic impacts make them desirable and potentially resilient amid political change.
The case for US-centric portfolios built on active, bottom-up stock selection remains intact even as political events have dominated the discourse. The broadening of stock market leadership and earnings momentum that began this summer is still underway, as productivity improvements and lower cost of capital energize mid-sized companies. We favor unheralded companies that help customers achieve profitable growth through innovation.
The full impact of policy changes will be revealed gradually. High-impact risks remain on the horizon from trade war counterpunches and supply chain disruptions, particularly for high-value-added components. In addition, the Federal Reserve has begun recalibrating monetary policy. Against this backdrop, investors may contend with near-term increasing volatility and risk premia during this period of policy flux. We remain focused on building portfolios of fundamentally strong companies, where valuation leaves room for re-rating. We see housing, construction, and energy efficiency as enduring sources of demand. Our portfolios are diversified, with some defensive allocations and slightly higher cash positions.
Non-US Investment Strategies
For our non-US strategies, we are mindful of the economic and geopolitical repercussions of the incoming US administration’s policies for Europe, Japan, and Emerging Markets countries. New tariffs, changes to climate commitments, and regulatory and fiscal policy reversals are among the issues likely to variously impact sectors and countries.
While the majority of our portfolios’ prospects will be driven by supply and demand developments in Europe and Asia, some holdings have substantial US businesses that could benefit from stronger US growth and would mostly avoid import tariffs. Companies selling environmental solutions, including electrification, energy efficiency, and renewable energy in the US may experience near-term volatility, but we expect Europe will continue leading a path to Net Zero, and global demand for these products will likely expand over time. It is also worth noting that international stocks are trading at historically large discounts to US peers, suggesting scope for positive surprises on a relative basis.
Our International portfolios invest in high-quality companies and are currently overweight the Industrials, Technology, and Financials sectors. We balance this underlying cyclicality with more exposure to the stable Healthcare and Utilities sectors and an underweight to commodities. We invest for the long term but are focused on navigating the shifting geopolitical landscape with thorough financial and ESG analysis of individual investment opportunities.
Emerging Markets are highly diverse, and countries within this investment universe may experience varying impacts from shifting global policies. Among the most anticipated changes is the potential imposition of additional tariffs on Chinese exports to the US. While we await clarity on these developments, it is important to recognize that global supply chain realignments are already underway, driven by the imbalances revealed during the COVID-19 pandemic. Notably, intra-EM trade has increased steadily, rising from about 25% in 1999 to over 50% today.
On the climate front, while a Trump administration may exhibit less commitment to sustainability initiatives, we expect continued progress within Emerging Markets. For instance, South Africa’s recent enactment of the Climate Change Act represents a significant milestone. EM companies have also played an increasingly vital role in the global AI supply chain—a complex ecosystem that cannot easily be restructured in the short term.
Given the diverse nature of Emerging Markets, a nuanced approach is essential when assessing domestic demand. A strong US economy tends to support EM growth, but rising inflation—especially if driven by higher commodity prices—could dampen domestic consumption, and higher US interest rates could pose challenges for EM economies with significant dollar-denominated debt.
Despite potential short-term volatility, our EM portfolio is strategically positioned to capture key opportunities, including the ongoing shifts in global supply chains, investment in green infrastructure, advancements in digitalization and AI, and domestic consumption growth.
In Summary
Across all regions and portfolios, our approach at Boston Common remains grounded in bottom-up stock selection. We build diversified portfolios of quality companies, investing dynamically in areas of resilient demand with strong management teams. Our experienced team has successfully managed through many market environments, and we are ready to navigate this post-election cycle, addressing short-term concerns while seeking longer-term opportunity.
In this piece:
The US has elected former President Trump as its next President.
The presidential election results were clear and timely, and the outcome was accepted by all. Markets were braced for a potentially contentious, disputed process and prolonged uncertainty while cities prepared for volatile demonstrations. In the end, fears of unrest did not materialize, and markets rallied in relief over the air of certainty surrounding the presidential transition.
Beginning in January, Republicans will have small majorities in both the Senate and the House. A sweep of this nature typically enables major policy changes in the early part of a Presidential term, as was the case in 2020 when Democrats held the Presidency, the Senate, and the House. The implications, however, are elevated this time because of several campaign promises with consequences for fiscal, labor, and trade matters. Market analysts are focused on the most probable and imminent economic effects while noting the potential impact on institutions, the environment, and human rights.
US Investment Strategies
Heading into the political transition, the US economy is resilient, running at a 2.5% real GDP growth trajectory likely to persist into next year. We see the election resulting in a few potential economic puts and takes. Proposed deregulation and tax cuts could modestly improve GDP growth. We also expect the US Dollar to strengthen with inbound capital flows; this could moderate interest rates and input costs. On the flip side, proposed tariffs and immigration policy could lower economic growth and these changes could disrupt supply chains and rekindle inflation. There is also increased potential for changes to major fiscal initiatives like the Chips Act and the Inflation Reduction Act. While this may lead to near-term market disruption, these programs’ economic impacts make them desirable and potentially resilient amid political change.
The case for US-centric portfolios built on active, bottom-up stock selection remains intact even as political events have dominated the discourse. The broadening of stock market leadership and earnings momentum that began this summer is still underway, as productivity improvements and lower cost of capital energize mid-sized companies. We favor unheralded companies that help customers achieve profitable growth through innovation.
The full impact of policy changes will be revealed gradually. High-impact risks remain on the horizon from trade war counterpunches and supply chain disruptions, particularly for high-value-added components. In addition, the Federal Reserve has begun recalibrating monetary policy. Against this backdrop, investors may contend with near-term increasing volatility and risk premia during this period of policy flux. We remain focused on building portfolios of fundamentally strong companies, where valuation leaves room for re-rating. We see housing, construction, and energy efficiency as enduring sources of demand. Our portfolios are diversified, with some defensive allocations and slightly higher cash positions.
Non-US Investment Strategies
For our non-US strategies, we are mindful of the economic and geopolitical repercussions of the incoming US administration’s policies for Europe, Japan, and Emerging Markets countries. New tariffs, changes to climate commitments, and regulatory and fiscal policy reversals are among the issues likely to variously impact sectors and countries.
While the majority of our portfolios’ prospects will be driven by supply and demand developments in Europe and Asia, some holdings have substantial US businesses that could benefit from stronger US growth and would mostly avoid import tariffs. Companies selling environmental solutions, including electrification, energy efficiency, and renewable energy in the US may experience near-term volatility, but we expect Europe will continue leading a path to Net Zero, and global demand for these products will likely expand over time. It is also worth noting that international stocks are trading at historically large discounts to US peers, suggesting scope for positive surprises on a relative basis.
Our International portfolios invest in high-quality companies and are currently overweight the Industrials, Technology, and Financials sectors. We balance this underlying cyclicality with more exposure to the stable Healthcare and Utilities sectors and an underweight to commodities. We invest for the long term but are focused on navigating the shifting geopolitical landscape with thorough financial and ESG analysis of individual investment opportunities.
Emerging Markets are highly diverse, and countries within this investment universe may experience varying impacts from shifting global policies. Among the most anticipated changes is the potential imposition of additional tariffs on Chinese exports to the US. While we await clarity on these developments, it is important to recognize that global supply chain realignments are already underway, driven by the imbalances revealed during the COVID-19 pandemic. Notably, intra-EM trade has increased steadily, rising from about 25% in 1999 to over 50% today.
On the climate front, while a Trump administration may exhibit less commitment to sustainability initiatives, we expect continued progress within Emerging Markets. For instance, South Africa’s recent enactment of the Climate Change Act represents a significant milestone. EM companies have also played an increasingly vital role in the global AI supply chain—a complex ecosystem that cannot easily be restructured in the short term.
Given the diverse nature of Emerging Markets, a nuanced approach is essential when assessing domestic demand. A strong US economy tends to support EM growth, but rising inflation—especially if driven by higher commodity prices—could dampen domestic consumption, and higher US interest rates could pose challenges for EM economies with significant dollar-denominated debt.
Despite potential short-term volatility, our EM portfolio is strategically positioned to capture key opportunities, including the ongoing shifts in global supply chains, investment in green infrastructure, advancements in digitalization and AI, and domestic consumption growth.
In Summary
Across all regions and portfolios, our approach at Boston Common remains grounded in bottom-up stock selection. We build diversified portfolios of quality companies, investing dynamically in areas of resilient demand with strong management teams. Our experienced team has successfully managed through many market environments, and we are ready to navigate this post-election cycle, addressing short-term concerns while seeking longer-term opportunity.
This piece is intended as an editorial review of a survey of risk considerations and does not constitute investment advice, a solicitation, or an offer to buy or sell any security. Past performance does not guarantee future results. All investments involve risk, including the risk of loss of principal.
References to third-party research, publications, and data sources are provided for informational purposes only. Boston Common Asset Management does not warrant the accuracy or completeness of third-party information cited herein. Readers should consult original sources and qualified professional advisors before making any investment decision.