As the U.S. presidential election enters a heated phase, the well-known British bank Barclays recently released a report stating that European stock markets have begun to reflect expectations of a Trump victory, with investors preparing for his tariff policies. Trump has re-emphasized tariffs as the core of his economic policy during the campaign, causing market sentiment to fluctuate.
The Barclays report points out that the uncertainty brought by tariff policies has dragged down the performance of European stock markets this year, especially in major industrial countries like Germany and Italy. The risk of tariffs might negatively impact their earnings per share, with the automotive, capital goods, technology, and chemical industries facing greater pressure.
Although some European companies have relocated production to the U.S. since 2018 to avoid the direct impact of the trade war, Barclays warns that the risk of stagflation caused by low growth and high inflation will still have secondary effects on the European market, especially in the scenario of possible trade retaliation.
Moreover, Barclays notes that if U.S. Democratic candidate Harris wins, European stock markets may see a rebound, particularly in the clean energy and renewable energy sectors. In contrast, the expectation of a Trump victory has led to poor performance in these sectors.
Regarding the U.S. stock market, Barclays predicts that if Trump continues to pursue tariff policies, the S&P 500 Index could see a 3.2% hit to its earnings per share next year, with the materials, industrial, and technology sectors being significantly negatively impacted. In the long term, retaliatory measures may also bring additional earnings pressure.
Currently, the election race between Trump and Harris is tight. Although traditional polls show a close battle, many investors believe that betting odds are more predictive than polls, especially as Trump's chances of winning are increasing.
