Analysts view Trump’s inauguration on January 20 as the first major test for the Australian sharemarket in 2025, likely to be followed by the Australian Reserve Bank’s interest rates decision on February 6.
Some of Trump’s policies – including new trade tariffs – spell trouble for global markets. IG market analyst Tony Sycamore said that Trump’s immediate actions following his inauguration would be “very important” for the health of the Australian sharemarket.
“Most of the forecasts that I’ve seen say it’ll be a good year for the stock market if Trump does this or that,” Sycamore said. “It depends on whether Trump prioritises tax cuts, regulation and cutting the fat off the US bureaucracy, or whether he goes for the tariffs.”
AMP chief economist Shane Oliver has said the Australian dollar could be in for a “rough ride” under Donald Trump’s America-first policies.Credit: Peter Rae
While the prospect of increased tariffs has accelerated inflationary fears, Trump’s agenda is also forecast to stimulate growth for big tech, industrial and mining stocks, and the banks, which are expected to enjoy increased borrowing demand as interest rates continue to be lowered in 2025.
“Trump is quite supportive of the stock market in general,” Amir said. “Cutting taxes, regulation and red tape is really good for tech stocks, especially the chip sector.”
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Tesla is among the companies that’s expected to benefit from an expected reduction in the cost of batteries in 2025, and reap reward from chief executive Elon Musk’s tight-knit relationship with Trump.
AMP chief economist Shane Oliver said the Australian dollar could face a “rough ride” under Trump, though he noted that lower spending in the US could put upward pressure on the Aussie dollar.
“It wouldn’t surprise me if as the US economy cools down into next year, that it leads to lower services inflation, which leads to lower inflation,” said Oliver, who expects constrained global growth in 2025.
“The Aussie dollar could turn less than 60¢ on the downside, or head towards high 60s if the US Federal Reserve turns dovish, and the Chinese stimulus comes strong.”
The RBA is expected to cut interest rates as early as February, as underlying inflation falls further and unemployment rises. The federal election, slated for sometime between March and May, might prompt an increase in government spending although is unlikely to influence short-term economic policies.
Weak Chinese economic data released this month renewed calls for an increased stimulus from its government, which could promise increased trade opportunities for Australian businesses.
Liu thought investors could expect “more and more” targeted stimulus packages from the Chinese government, as it loosens its policies in a bid to supercharge a slowing economy.
“Policymakers have been very clear – they will keep stimulating until they get it right,” Liu said. “Given the underperformance of the [Australian] utilities sector, the stimulus will provide a tailwind for them.”
Miners are also expected to benefit from new Chinese stimulus packages, and from movement across global currencies.
“You would expect the US dollar to eventually roll over, and the rolling over would allow the pushing up of commodity demand, which is to the benefit of our mining sector,” Amir said. “It will make for – all in all – a pretty good year.”
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