Trump has called President Joe Biden’s climate change policies a “green new scam” and is expected to try to undo much of the present administration’s work, including the Inflation Reduction Act (IRA), which gives tax breaks and subsidies to American and foreign companies investing in sustainable energy.

The 2022 law has encouraged European sector companies to grow or establish a US presence, but a second Trump presidency is causing them to pause.

“With Donald Trump who A) is very opportunistic, B) is highly controversial, and C) is very unexpected, you have to ask yourself whether it makes sense to take such a risk,” H2Apex CEO Peter Roessner told Reuters.

The corporation could have developed a hydrogen tank production unit in the United States for a third of USD 15 million under the IRA. Though the company had begun conversations with possible consumers, Roessner cancelled the idea in February 2024 due to concerns that Trump could be reelected.

Trump’s shooting at an election rally and Republican Party nomination days later increased market predictions that he would take back the White House in November this year.

Trump and Kamala Harris, the likely Democratic nominee with Biden-like climate beliefs, are closing the survey gap (in terms of who is ahead in the Presidential race). However, Roessner’s statements show Europe’s clean tech corporations’ concern about a Trump presidency and their preparations.

It might jeopardise USD 1 trillion in low-carbon energy investments by 2050, according to Wood Mackenzie.

Consultancy Roland Berger warned that while a full IRA repeal was unlikely, a Trump administration might threaten electric car, electric vehicle charging, solar power, and energy efficiency subsidies.

SMA Solar, a German solar company, warned of a possible government change in the United States, the world’s second-largest solar market after China, recently. While investigating sites in many states, the world’s top solar inverter maker hopes to locate a place for a planned production in the US by June 2024.

Boardroom Headaches

SMA told Reuters that it “is noting that the undetermined conclusion of the presidential elections in the USA is currently leading to certain hesitancy to invest in renewable energies locally.” Because of that hesitation, clean tech shares have underperformed global stocks since the assassination attempt. The RENIXX index measures the world’s 30 largest renewable enterprises.

Trump stated in May 2024 that he would attack the sector on his first day in office if reelected, hurting Orsted, the world’s largest offshore wind farm developer. Some renewable energy companies, however, seem unfazed by uncertainties.

German wind turbine company Nordex has already announced restarting production at a mothballed Iowa plant “regardless of political changes” because the United States will remain a major market for the venture.

However, some others claim delays as possible co-funding partners back out. Hydrogen producer Thyssenkrupp Nucera lowered its alkaline water electrolysis unit projection earlier in 2024 due to delays in US project investment choices.

The corporation stated it would be crucial to how the IRA programme will appear following the election while focusing on the world’s largest economy. It stated that strategic investors with a long-term emphasis on cleantech were more likely to resume projects earlier than opportunistic investors during uncertainties.

Norwegian rival Nel said it had yet to decide whether to invest in a Michigan production site, depending on US demand for its products. Election uncertainty in the world’s largest democracy is also affecting businesses outside of cleantech. German machinery giant Trumpf recently reported a 12% reduction in US sales for its 2023–24 fiscal year, citing “geopolitical uncertainty” that made industrial clients apprehensive.

Marcus Berret, global managing director at Roland Berger, while uttering these few words, “boardroom headaches have increased significantly,” said rising global complexity might cause “analytical paralysis” in investment decisions.

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The social polarization and discord that has become synonymous with the Trump presidency had little to no effect on stocks and commodities. The market value slumped for a few weeks and then went on to mark one of the most historic rallies in history. As protests ravaged America after the brutal murder of George Floyd, stock prices soared. Amidst the chaos, the markets signaled that politics aside, everything was going great.

Wall Street’s a place for number-crunching dreamers who now must reconcile with reality. The Federal Reserve has decided to combat sky-high inflation by hiking interest rates. The decision has crushed stock prices as corporations use billions in value.

On Friday, the 13th, stocks rose 2.4%, though hardly enough to recuperate the week’s losses. For the first time since 2011, it was the sixth consecutive losing week for the market. The looming recession and persistent inflation will most likely push S&P 500 further down. In May, The index fell more than 16% from its peak in January.

Though 72% of all holdings in the market belong to the super-rich, over half the US population has some money invested in the stock market. Most Americans would now have substantially fewer returns and thus less wealth to support their retirement or their children’s college education.

These events unfold right before the midterm elections, aggravating the Democrats who struggle to convince the people that Joe Biden and his party are what’s best for the economy.

Many Trump supporters hailed the former President as the ‘savior of the economy’. Donald Trump was not shy in iterating his contributions to the economy. And now, Biden and the Democrats will take the blame for this meteoric stock market crash.

People often forget that the stock market is not a barometer of the economy. Its rise and fall are not proportional to economic successes and failures in the real world. For example, spending is still high, and unemployment hasn’t been this low since the 1950s.

But people do look at the stock market as an indicator of growth. And, week after week of losses can be psychologically punishing for the average American. Chief economist at Moody’s Analytics remarked that people are simple, and they look at the stock market to see how well they are faring economically. He said they feel good when they see green on the screen and crummy when it’s red.

Stock prices thrived under years of low-interest rates and low-yielding alternatives like bonds. The market was one of the few places where they could make big money quick.

Policymakers cut rates lower during the pandemic to successfully help businesses through the lockdowns. As a result, companies funneled money into stocks, kept hiring, paying rent, and ramping up production; shareholders got ample dividends and stock buybacks.

Now, the crippling inflation which the average family struggles with has caught up with the suits on Wall Street. The Fed has finally increased interest rates to check the inflation of food and fuel prices.

Wall Street giants have foreseen this scenario, and despite their preparations, it is a painful experience for investors.

Emily Bowersock Hill, the founder of Bowersock Capital Partners, said that she doesn’t think people recognize how fragile a foundation the stock market was resting. Bowersock is the Chairperson of the investment committee of the Kansas Public Employees Retirement System, a $20bln pension fund.

Hill added that some decline was inevitable and healthy to clear out “meme stocks”. She said speculators drove up prices of dubious business prospects like BlackBerry, AMC Theatres, and Bed Bath & Beyond.

But it isn’t just dubious companies that took the hit. Industry giants like Amazon lost more than 30% of their value since the onset of 2022. Alphabet went down by 20%, and many are rethinking the worth of these firms.

Virtually, every stock devalued in one of the most depressing seasons in recent history. The symbolic value of market success is something no one knows better than Trump.

During his presidency, Trump used to pressure the Fed to reduce interest rates further and frenziedly tweeted about stock market booms. Even during the peak pandemic season, when morgues and hospitals were full and schools and malls empty, Trump tweeted about the greatest stock market success since 1974.

Most Americans own stocks, but it is still a rich person’s game as 5% of all people hold 72% of all market assets. However, symbolism is of significance to the general public.

Richard Sylla, a professor of economics at NYU’s Stern School of Business, remarked that markets are important because it makes the news every night. Often, winning markets is crucial to winning a presidency.

On May 13, the University of Michigan’s consumer sentiment index dropped by 13 points from when covid first hit- much lower than expected, as noted by Ian Shepherdson, the chief US economist at Pantheon Macroeconomics. He went on to say that such deep pessimism suggests that people have short memories.

All this spells trouble for the Biden administration. The long years of prosperity end under his watch, and a new bull run might be a while away.

On May 9, Republican Congressman Jim Jordan tweeted, “Your 401k misses’ president Trump.” Biden critics even trended “My 401k” nationally on Twitter. A critic tweeted, “I don’t know about you, but after looking at my 401k statement I think we need Trump back.” CWith the Supreme Court abortion laws Janet Yellen, Treasury Secretary admitted on Wednesday that Biden’s spending policies were worsening the inflation but added that the economy was still strong.

The 401(k) is an employer-sponsored retirement plan in the United States. An employee that opts for a 401(k) agrees to transfer a part of his salary to an investment account. This money is invested in the stock market, which at the moment isn’t faring well.

Sylla co-wrote a book after studying two centuries of interest rates which accurately forecasted in September 2011 the high returns the coming decade would produce.

Returns in this decade will be more “muted,” Sylla said. Even if the market recovers, it won’t rebound as it did after the first months of the pandemic.

The average stock market return in the last decade was around 17%, as per the S&P annual return generated in the decade leading up to 2022. Now, analysts predict single-digit returns of approximately 5% for the coming years- an extremely dismal outlook for investors.

Sylla wittily explained that the only good thing about the stock market now is that those who weren’t doing so well can find solace in the fact that others aren’t either. He predicted that the years of the rich getting richer and the poor getting poorer were over. According to Sylla, no one’s getting too rich too soon anymore.

Hill pointed at the generation of investors who entered the market in the last five years and made huge gains. They are used to a time when things always rebound quickly, and the stock values keep growing faster and faster despite minor setbacks.

The Bowersock Chairperson noted that investors are in the habit of ‘buying the dip.’ They aggressively buy stocks when prices plummet with the assurance that they will go up very soon. She said this aggressive strategy might not work in the future.

Hill concluded that she sees no easy way for President Biden to control inflation without unnerving investors. Any move the government and the Fed makes might negatively impact the market at this point.

Cracking down on wage growth – an inflationary force – is political suicide for a Democrat, and the war in Eastern Europe, which is driving up oil, gas, and food prices, seems to have no end in sight.

Pension and other investment experts are well prepared for a phase of substantially low returns. But Zandi added that the casual investor who expected their retirement funds to grow at a remarkable pre-crash pace is in for a shock.

When the average American learns of this adjustment, the stock market’s three-decade-old symbolic value will diminish. Moody’s chief economist concluded that something else would take the stock market’s place, but he is unsure of what that will be.

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The bank in a note to its clients said “In Latam FX, we cut the regional OW, which would benefit most from a strong cyclical picture coming from large U.S. fiscal stimulus and clear Biden victory. However, the bank kept an overall neutral stance on emerging market currencies, saying investors needed to ‘wait for the outcome of the Presidential election, which is close and changing hourly.’”

Chile’s peso gained momentum across Latin American currencies earlier this week. The gains were attributed to positive Chinese manufacturing data which supported copper prices, media reports said. However, the sentiment remained quiet owing to the US elections. 

It is reported that China’s manufacturing sector demonstrated strong performance in nearly a decade in October. The mainland is the largest consumer of metal. Now JP Morgan will hold 71 percent of its Chinese securities joint venture following the completion of a transaction to acquire a 20 percent stake from its local partner, media reports said. 

The increase in its stake holding will in fact position the bank for having the  highest ownership stake in Chinese securities joint ventures. It is reported that China’s factory sector reached a decade-high record on the back of heavy domestic demand.

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