How are U.S. equities performing after Trump's victory?

“I will govern with a simple motto: promises made, promises kept.” This was one of the first statements Donald Trump made after being re-elected as President of the United States. Since then, all eyes have been on the country, and more specifically, on its president and the fulfillment or not of those “promises.”

Trump won the election with a focus on protectionism, tax cuts, and deregulation. These last two “pro-growth” points were key to the optimism that sparked the rise in the U.S. stock market after his victory. The day after the elections, the three main stock exchanges hit record highs: the Dow Jones rose 3.57% to 43,729 points; the S&P 500 gained 2.53% to 5,929 points; and the Nasdaq increased by 2.95%, reaching 18,983 points.

However, the current situation is different. As months have passed, investors have become more cautious, as the Republican leader, “unlike in his previous term, has started by prioritizing his most inflationary measures, such as raising tariffs and/or imposing barriers to immigration,” explains Javier de Berenguer, investment manager and fund selector at MAPFRE Gestión Patrimonial.

In recent weeks, Trump has dominated the news with his stance on tariffs. The U.S. president appears uncertain about the tariff levels and their implementation, having made multiple changes in his position on the issue. Recently, he reversed his stance again and announced a one-month pause on the 25% tariffs on imports from Mexico and Canada, effective until April 2nd.

Regarding Europe, Trump has also made it clear that he intends to impose 25% tariffs on the European Union if no future changes occur. This announcement prompted EU leaders to agree to increase defense spending to 800 billion euros over the next four years.

As for China, potential tariffs could be set at 20%. In response, the Asian country has imposed tariffs ranging from 10% to 15% on certain U.S. products, including chicken, soy, pork and beef, fish and shellfish, fruits, vegetables and dairy products, coal, natural gas, pick-up trucks, and sports cars.

The U.S. president acknowledged that the tariffs could cause "some pain" for Americans, but he believes they are justified.

The market's response to the onset of this trade war has been swift and is unfolding in real-time. These policies have intensified the climate of uncertainty that investors were already facing, reversing the initial optimism surrounding Trump’s re-election. De Berenguer warns that if the Trump administration continues down this path, it could erode consumer and business confidence, negatively impacting economic growth in the U.S. over the medium and long term.

One indicator of this is the GDPNow statistic, a U.S. GDP forecasting model for the current quarter developed by the Federal Reserve Bank of Atlanta. Its latest update, from early March, is not promising: according to this forecast, the U.S. economy is expected to contract at an annual rate of 2.8% in the first quarter of 2025.

Reasons for optimism in the medium and long term

However, De Berenguer explains that there are sufficient reasons to continue investing in U.S. equities for the medium and long term.

• Development of strategic industries: “Semiconductors, AI, EVs, autonomous cars, and other sectors related to advanced technology, as well as their beneficiaries,” says De Berenguer.
• Political leadership favorable to growth and the business fabric: “Something we believe will be reinforced by the current administration,” he adds.
• Geopolitical and trade leadership: “This is precisely what was in question before Donald Trump’s arrival and is why he has started by prioritizing the trade imbalances the country faces (versus the rest of the world),” he explains.

De Berenguer acknowledges their optimism regarding U.S. equities in the coming years, but notes that this “doesn't mean the path will be free of volatility,” as factors such as valuation could trigger market corrections. In this regard, the MGP expert states, “Trump’s mission is to reactivate American industry, particularly in states less exposed to the tech sector, where the average citizen is not as content as in large urban areas. For this, he needs a fair trade deal with countries that are currently covering this production, along with lower energy costs.”

De Berenguer believes that if Trump succeeds in creating a more competitive environment for domestic production, it could lay the foundation for sustained economic growth and expand opportunities for sectors that have been overshadowed by big tech companies in recent years.

For investors looking to invest in U.S. equities, MAPFRE AM offers the Fondmapfre Bolsa América R FI fund. This fund includes major holdings in companies like Alphabet (the parent company of Google), JPMorgan Chase & Co, Microsoft, Citigroup, and Gilead Sciences. It has achieved an annualized return of 9.45% over five years and 7.60% over ten years, with assets under management of nearly 300 million euros.