With the US presidential election becoming a hot topic for markets, economists at Nordea look at the potential consequences of a Trump comeback in 2025. 

Markets are underestimating the risks that a new Trump presidency would involve

Trump’s comeback would likely lead to more inflationary policies, a renewed escalation of the trade between the US and abroad with China in focus, heightened geopolitical risks and higher US government deficits. 

While the first term went relatively well for US stock markets and the global economy even with heightened trade tensions, there is no guarantee that a second Trump term will be the same. We believe that markets are underestimating the risks that a new Trump presidency would involve, especially heightened geopolitical tensions and US sovereign debt concerns. Overall, we believe that a Trump presidency will lead to higher US yields.

For the USD the outlook is more ambiguous, but a Trump reelection will likely continue to support a stronger USD in the short term due to trade and geopolitical tensions, while a weaker USD is likely longer out especially if sovereign debt concerns materialise