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🤔 Are Your Investments Trump-Ready?

🇮🇳 What About The Indian Economy?

Author

Madhu, Altcase
November 11, 2024

Welcome to this week’s Altsights!

Donald Trump will be the 47th President of the USA 🇺🇸

But you already know that.

Today, I’d like to discuss the potential implications of Trump’s Presidency. More precisely:

1. How will Trump’s Presidency affect the Indian economy? 🇮🇳

2. How will it affect your investment portfolio? đź’°

Quick note: I don’t have a crystal ball. The views presented here are based on Trump’s promises during his Presidential campaign.

Trump’s Impact on the Indian Economy 🇮🇳

The USA is India's biggest export destination. In FY24, we exported $77.5 billion worth of goods and services to the USA.

Engineering goods, chemicals, and electronics were the top three exports, contributing about $40 billion.

Now, Trump’s policies are protectionist. Especially when it comes to the US manufacturing sector and local employment.

So, Trump plans to impose a 10% tariff on all imports to encourage onshore manufacturing and boost employment for US locals.

This impacts India and other nations that export goods to the US negatively 📉

But Trump Hates China The Most 🇨🇳

While the USA is India’s largest export destination, India is not the USA’s largest importer - it is China.

China exported goods worth $450 billion to the USA in 2023 - 6X of Indian exports.

I bring China into the discussion because Trump plans to impose a 60% tariff on all Chinese imports (vs. the 10% on non-Chinese imports).

Despite all the incentives and tax breaks the Trump administration plans to offer to onshore manufacturing, it will take some time to get going without relying on imports.

Simply put, the USA will have to rely on alternatives for Chinese import items before manufacturing is on-shored.

India could benefit despite the 10% tariff if we successfully position ourselves as a viable alternative to China âś…

Trump Has Promised Peace 🕊️

Wars are bad for everyone. Even for those who are not directly involved.

Trump, like any true capitalist, hates wars. He is especially keen on restoring peace between Russia and Ukraine for three reasons -

  1. The USA has supplied weapons worth $60 billion to Ukraine at no cost - this is wasteful spending from the USA's point of view

  2. Many countries imposed sanctions on Russia and stopped purchasing oil from them leading to high oil prices for everyone

  3. Restoring peace is a feather in the cap of any global politician - why wouldn’t Trump want it too?

If Trump manages to broker a peace deal, it will end sanctions on Russia, and oil prices are likely to stabilise (at lower levels), benefitting oil-importing countries like India âś…

Trump’s Impact on Your Investment Portfolio 💰

All investment portfolios are made up of different asset classes.

I discuss the potential impact on each asset class below -

Indian Equity 🇮🇳

Over the long term, Indian equities should be immune to Trump’s policies.

However, courtesy of increased tariffs and the planned onshoring of manufacturing, export-heavy sectors like IT and Pharma may be impacted.

But the export-heavy sectors also have a window of opportunity, as I discussed earlier.

US Equity 🇺🇸

Trump plans to lower corporate tax in the USA and offer incentives to US businesses. He also seeks lower interest rates to stimulate economic activity.

These plans, if executed, will be big boosts for US businesses and stocks 🚀

It is important to understand that it is very difficult to implement lower corporate tax along with lower interest rates as it could lead to very high inflation đź”´

So, while the idea seems nice on paper, it is not easy to implement sustainably.

Gold (in India) 🥇

Gold has performed quite well in INR terms over the years mainly because INR depreciates against the USD by 3-5% every year.

With the dollar expected to become stronger under Trump’s Presidency, gold returns in INR terms should get a boost 🚀

Bitcoin 🪙

During his campaigning, he promised to support the crypto industry and even floated the idea of a Bitcoin reserve (similar to gold reserves).

No wonder Bitcoin has rallied ~20% since Trump’s Presidency became almost certain on 5 Nov.

Hope you liked this week’s Altsights.

See you next week!

Cheers,
Madhu,
Founder, Altcase