Experts weigh in on what a Trump win would mean for GCC economies, financial markets

As the 2024 US elections draw near, anticipated tension and uncertainty in the markets have become increasingly evident. Experts predict that a Trump victory could affect the GCC markets in several ways.

Arun Leslie John, Alarabiya News, March 22, 2024

As the 2024 US elections draw near, anticipated tension and uncertainty in the markets have become increasingly evident, a common phenomenon during election cycles. Close races, especially in pivotal states, underscore the importance of strategic planning among investors, who are bracing for the possibility of Donald Trump returning to the White House.

Experts predict that a Trump victory could affect the GCC markets in several ways. Trump’s emphasis on bolstering domestic energy production, deregulating the oil and gas industry, and promoting LNG exports globally could strengthen the US energy market. However, this might adversely impact the economies of the GCC countries.

Experts, in statements to Al Arabiya English, anticipate that Trump’s trade policies, especially toward China, could influence global trade dynamics and oil demand. A slowdown in China’s economy due to trade tensions could decrease the demand for oil exports from GCC countries, affecting oil prices and the economies of the Gulf states.

Arun Leslie John, Chief Market Analyst at Century Financial, believes Trump’s foreign policy decisions, including his stance on the Russia-Ukraine ongoing war, could have repercussions for the GCC markets. Weakening Ukraine’s defense capabilities, as Trump’s policies have suggested, may affect geopolitical stability and energy markets, potentially impacting the economic growth of GCC states.

Trump’s proposed tariffs on imports might bolster the performance of the US dollar by reducing spending on foreign goods, benefiting GCC currencies like the Saudi riyal or the UAE dirham. However, a stronger dollar could also exert downward pressure on oil prices.

Trump’s return and GCC stock markets

As for the GCC stock markets, Century Financial’s analysis of data from the past five elections, starting in 2004, shows a positive correlation with US markets in four out of the five years. In 2020, the leading UAE indices (Dubai and Abu Dhabi market indexes) suffered losses, while both the S&P500 and Nasdaq ended the year with substantial profits.

With the exception of 2008, all other four election years were positive for the Tadawul Saudi Stock Market index, with an average return of 8.4 percent.

CPT Markets’ historical records indicate that stock market volatility typically increases in the months leading up to a US election due to political uncertainties and the continuous reassessment of poll results and market expectations.

Traditionally, a Republican lead is viewed as favorable for stock prices since Republicans tend to support policies that enhance company earnings and shareholder profits. Conversely, a Democrat lead is expected to negatively impact equity prices due to Democrats’ focus on wealth redistribution, social rights, and benefits.

Yusuf Mansawala, Chief Market Analyst at CPT Markets, notes that while there is no direct correlation between US and GCC Stock Markets at a macro level, the US elections and Trump’s controversial policies will have implications for the GCC and the Middle East that need cautious handling.

Mansawala, in statements to Al Arabiya English, added, “Though it’s still early, immediate concerns revolve around the resilience of oil prices, which are currently declining alongside a weaker dollar, indicating potential future volatility.”

However, a weaker dollar could benefit GCC markets, enhancing the appeal of regional investments.

Source

Alarabiya News