With President-elect Donald Trump’s inauguration only at the end of January, a chief investment officer believes a “lame duck” period has arrived for global markets.

“The initial global market reaction was to extend the so-called ‘Trump trades’, leading to a stronger US dollar, higher US yields and stronger US equities,” said Damien Boucher of Finisterre Capital.

But now, according to Buchet, markets may have little to “think about” beyond key nominations and the occasional statement from the president-elect.

The CIO noted that even before the post-election rally, the market's pricing of the result was relatively lower compared to pre-election expectations.

"This can be explained by hopes for some dilution of the most radical proposals, as well as the fact that the implementation schedule may end up being longer," he said.

One key lesson from Trump's first presidency, Bouchet said, is that the Republican's position on major issues can change quickly, making "accurate pricing even more difficult."

Elaborating on the period between now and Inauguration Day, he believes there is still room for currency and interest rate markets to recover from their initial post-election weaknesses.

"A lack of further adverse market reaction in December could lead to some delay and short covering at the end of the year," he said.

"Ultimately, we will need to position our portfolios around Trump's likely long-term policies, but the amount and momentum of those policies may be difficult to predict before January."

The winners and losers in emerging markets

Buchet also pointed out that post-election market bias clearly favored emerging market (EM) currencies weakening against a strengthening US dollar, with declines ranging from 2.1 percent for the Chinese yuan to 3 percent for the Mexican peso.

"These losses, based on the pre-election market turbulence, suggest that further significant currency depreciation may be limited in the short term," he said.

"Meanwhile, EM credit spreads are following the global tightening trend, mostly through passive tightening in the face of US yield increases, which presents an opportunity to reduce exposure to overvalued or 'in-focus' names driven by Trump."

On the other hand, frontier market debt is stable to positive price movements, thanks to continued global demand for credit and higher yields.

And while the chief investment officer (CIO) thinks EM debt can continue to do relatively well in terms of fundamentals, given that many emerging markets are not on the front lines of fire under the Trump administration, he said there were notable exceptions to be countries like China and Mexico.

"Amid continued concerns about consumer spending and unfavorable economic conditions at home, we believe China will need to continue with additional stimulus measures over the next few months to cushion its own domestic slowdown along with the impact of likely trade tariffs - which you should be among the first to stand after Inauguration Day,” said the CIO.

“We think anything short of a more compelling social safety net [which President Xi Jinping is notably against] or a 'builder of last resort' initiative for the property sector may not create a lasting impact."

Bouchet added that China could also choose to "weaponize" the yuan to counter US tariffs, but said the move was unlikely to be used before January 20.

"We believe markets may still need a weaker yuan in the coming months."

Looking at EM more broadly, Buchet pointed out that many markets in the region are increasingly reluctant to cut interest rates in light of the recent strengthening of the US dollar, and that this is likely to continue given higher US yields and uncertainty over how which the Federal Reserve will respond to the economic policies of the Trump administration.

"This could limit EM growth prospects or lead governments to seek a looser fiscal stance."

Ultimately, Bouchet reiterated that the greatest uncertainty is around the timing and scale of policy measures.

"We won't be able to assess the measures until early 2025, but, as always, the worst is never a certain outcome," he said.

"Markets may shift to a glass-half-full approach, hoping for dilution and delaying the most extreme measures, possibly extending the year-end rally into early January." The actual time to count on 'Trumponomics' will have to wait until later in 2025," he said.