Donald Trump’s election victory has shifted investor interest to India and Japan due to concerns over potential tariffs on Chinese goods, which could reach up to 60%. Morgan Stanley has reiterated its preference for India and Japan stocks over China, as India is seen as a manufacturing alternative with a domestic-driven economy, offering relative immunity to global risks. Meanwhile, Japanese stocks stand to gain from higher U.S. interest rates, which may weaken the yen and benefit Japan’s exporters. Supply chain shifts away from China also support investment in India, Japan, and Southeast Asia, according to veteran investor Mark Mobius, who noted that India has the labor force to match China’s. Following the election, the MSCI Japan and MSCI India indexes rose over 1.5%, while MSCI China dropped more than 2%. Analysts expect ongoing pressure on Chinese stocks if Beijing’s stimulus efforts fall short, potentially increasing investments in Japan. However, Societe Generale m
Wall Street’s top executives gathered at Saudi Arabia’s Future Investment Initiative this week, where they expressed optimism about the US economy but voiced concerns about Europe’s slower growth. Among the attendees were Citigroup’s Jane Fraser, BlackRock’s Larry Fink, and Goldman Sachs’ David Solomon, who have become regular participants at the kingdom’s annual event.
“The US economy is doing quite well, it has been very resilient,” said Solomon, noting his expectation for a “soft landing” in the US, marking a stark contrast to the previous years when fears of a recession dominated discussions.
The International Monetary Fund (IMF) recently upgraded the US growth forecast to 2.8% for 2024, while the eurozone is expected to grow by just 0.8%, and the UK by 1.1%.
Despite the upbeat outlook for the US, many executives cautioned that market expectations for further Federal Reserve rate cuts could be overestimated. None of the top executives at the event, including leaders from Goldman Sachs, Morgan Stanley, and Carlyle Group, anticipated two additional cuts this year, though some suggested there could be one more reduction by the end of 2024.
Concerns about European growth were a recurring theme. Standard Chartered's CEO Bill Winters highlighted that much of Europe’s corporate profit growth is coming from markets outside the continent, describing this as a “structural problem.” Solomon also expressed unease about China’s economic situation, compounding fears of global stagnation.
In addition to economic concerns, geopolitical risks are intensifying. Ongoing conflicts in the Middle East, the war between Russia and Ukraine, and growing trade protectionism were all cited as escalating threats to global stability. The upcoming US election on November 5, which features a tight race between Vice President Kamala Harris and Donald Trump, also adds to the uncertainty.
“The expectation today is that Donald Trump will win the White House,” said Ken Griffin, CEO of Citadel, noting the race remains a “coin toss.”
The outcome of the election is expected to have significant implications for US monetary policy in 2025, with Goldman’s Solomon emphasizing the difficulty of planning future policy until after the election results are clear.
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