Markets Everywhere Are Getting Rattled by Trump’s US Agenda

(Bloomberg) -- Donald Trump’s election victory has catapulted US stocks to fresh records and pushed the dollar to a two-year high. It’s anything but good news for the rest of the world.

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Equities excluding the US are tumbling, with an MSCI gauge at its lowest in three months. An index of developing-market currencies has lost more than 1% following the US election, coming close to erasing this year’s gains. European stocks and the euro have flopped.

The stark divide between US and non-US assets has become more pronounced as Trump’s cabinet starts to take shape, with loyalists ready to carry out his “America First” proposals named for key posts. That has confirmed the worst of investors’ fears: that the push for higher tariffs, particularly on China, will gain momentum, alongside a host of potentially disruptive policies that can drive inflation higher and bind the hands of central banks.

Such worries have prompted investors to park their money in US assets. Fund managers’ exposure to American stocks jumped to the highest since 2013, according to a survey from Bank of America Corp. On the other hand, emerging markets such as China and Mexico, often seen as the most vulnerable to Trump’s trade policies, have taken a hit.

Trump’s more domestic-focused policies will favor US companies, said Rajeev De Mello, chief investment officer at Gama Asset Management SA. “We did reduce risk ahead of the US election, and it’s now time to increase portfolio exposure but rotate into investments which will benefit from Trump’s expected policy choices.”

Wednesday is shaping up to be another grim day, with an MSCI benchmark for Asian stocks sliding more than 1% and setting the stage for a weak session in Europe. Shares in South Korea were headed for a one-year low as foreigners sell companies like Samsung Electronics Co. that are vulnerable to trade protectionism.

A Bloomberg gauge of the dollar edged higher after reaching its highest since November 2022 in the previous session.

Investors are closely tracking cabinet appointments for clues on whether Trump’s campaign rhetoric will materialize into policies. The president-elect had earlier vowed to impose massive new tariffs, eyeing a duty of 20% on all foreign goods and 60% or higher on those coming from China. That’s revived fears of another trade war that can disrupt global supply chains and hurt companies with a heavy reliance on US sales.