The re-election of Donald Trump is expected to shake up global markets and impact Australians’ finances, from mortgage rates to superannuation returns. With bond markets and investors reacting to Trump’s win, the full effects on Australians’ wallets will take some time to unfold. Here’s what to expect for interest rates, cost of living, superannuation, shares, and cryptocurrencies.

Interest Rates: Higher Rates, Longer Pain

Trump’s presidency has renewed expectations for continued high interest rates. While Australian bond markets initially anticipated a Reserve Bank of Australia (RBA) rate cut in May 2024, this may now be pushed to July, a move that could keep monthly mortgage payments higher than anticipated.

For example, a borrower with a $1 million loan at an average variable rate of 6.34% currently pays about $6,652 per month. Previously, repayments were projected to drop to $6,205 by 2026. However, under new bond market forecasts, that figure is now expected to reach $6,381—a smaller reduction that means an extra $272 in monthly repayments for Australian households.

While Trump’s influence could push rates higher, his trade policies might have the opposite effect. A resurgence of trade wars could slow growth and ultimately push interest rates lower, making the outcome uncertain.

Cost of Living: Possible Increase in Imported Goods

With Trump’s protectionist policies, Australians may feel the pinch at the checkout. In 2018, Trump’s tariffs on Chinese goods drove up global shipping rates. Similar policies could raise the costs of imported goods, from cars to household appliances. A pro-business stance from Trump could also drive up oil prices, potentially increasing the cost of petrol and transportation.

Rising demand for oil could push prices up further. While a current supply glut might help keep prices stable, Trump’s aggressive economic policies could quickly tip the balance.

Superannuation: A Boost for Now, But Volatility Ahead

Australian superannuation funds, which have increased their US equity holdings to around 30% in recent years, received an initial boost from Trump’s victory, as US markets rallied. This is a short-term gain but warns of potential volatility in the longer term. Trump’s aggressive policies could affect international markets, including Australia’s.

Long-term investors, particularly those nearing retirement, should ensure their portfolios are diversified and contain enough liquid assets to avoid losses in a market downturn.

Stock Market: US Stocks Benefit, ASX May Struggle

Trump’s America-first agenda and deregulation promises have historically boosted US stocks. US assets might outperform Australian shares if Trump’s policies favour American companies over foreign trade partners. However, increased tariffs could have a negative impact on Australia’s economy, particularly if China’s economy slows down as a result.

Australian companies with significant US operations, such as BlueScope Steel and Worley, are expected to benefit. Trump’s pro-energy agenda aligns well with their operations in the oil and gas sectors, which may see increased investment. Shares in companies like Amcor, BlueScope, and Santos may also see a lift as they capitalize on Trump’s focus on deregulation and US growth.

Cryptocurrency: Bullish Sentiment Ahead

Trump’s re-election has sparked renewed optimism in the cryptocurrency market. Bitcoin, which surged to an all-time high of nearly $US77,000 after the election, appears poised for a new phase of growth. Trump’s pro-crypto stance, highlighted by his promises of strategic cryptocurrency policies, has fuelled confidence among investors. Dean Seroni, CEO of Merkle Tree Capital, recently recognized as the top-performing fund of 2023/24 by the Australian Financial Review, has expressed a bullish outlook on Bitcoin. Seroni believes the alignment of favourable political conditions and increasing institutional adoption could drive significant growth in Bitcoin and the broader crypto market in the years ahead.

The Takeaway: Prepare, Don’t React

Despite Trump’s unpredictable policy mix, we advise making drastic investment moves in response. The long-term impact of his presidency will depend on the specific policies he implements and the order in which he pursues them. Investors should continue to monitor Trump’s actions closely but avoid knee-jerk decisions, as some effects of his policies may not become apparent until 2025.

For those close to retirement or heavily invested in superannuation, diversification and liquidity should be top priorities to weather any potential market shocks. Trump’s policy decisions could spark short-term rallies, but the long-term effects are far less certain.

In the meantime, Australians can expect continued interest rate pressures, potential increases in the cost of living, and fluctuations in the value of superannuation and stocks as global markets respond to Trump’s return. As always, patience and preparation remain the best strategies for managing financial health amid uncertainty.