The Republican candidate has promised significant tariffs on imports, including up to 60 percent on Chinese goods.

However, Brent Puff, vice president and senior portfolio manager at American Century Investments, thinks the approach will actually be more moderate.

“I think the biggest concern in the market in anticipation of a Trump victory is some of the policies he’s announced on trade,” he told InvestorDaily.

"My personal view is that whatever policies are ultimately implemented on the trade front will be less extreme than the policies he articulated as a candidate." That doesn't mean we won't have more tariffs, I think there will, but I think they will be on a more moderate plan of action."

The portfolio manager, who expects Trump to win a "very close election," noted that as president Trump would seek to negotiate better terms with some of America's trading partners and create incentives to encourage American manufacturers to keep production in the country.

As for the economy as a whole, Puff expects a Trump victory to trigger a reflationary boost to the economy, triggering a "risk-on" response in financial markets, with pro-cyclical sectors such as industrials, financials and consumer discretionary likely to see an initial positive reaction.

Puff noted that a Trump victory would likely lead to a shift away from longer-duration growth assets, such as technology, and more defensive sectors, such as consumer staples and utilities, while 10-year bond yields would continue to rise. , which will result in a "slightly steeper" yield curve.

Given the reverse scenario, he said Republicans would likely win the Senate regardless of whether Kamala Harris won the presidency.

"Essentially, you're going to have a split of power between the conservatives and the Democrats, and I think for the most part the markets are going to interpret that as kind of a victory for the status quo." I expect it to be a much weaker reaction in the financial markets.”

Market reaction

Puff emphasized that while markets may react sharply in the short term, the real question is their longer-term response.

"I think what we're probably going to see in the next 12 to 18 months is going to be greater participation from all parts of the market," he said.

“I think the outlook for technology [sector] continues to be good, but other parts of the market that are more dependent on the overall health of the real economy should start to participate and benefit a little more from the trends that are likely to play out over the next 12 to 18 months.”

This period is likely to include lower interest rates as well as improving economic activity.

Commenting on international equity markets, Puff predicted that expected US election results would play out similarly overseas as markets outside the US view Trump and the Conservatives as "reflationary".

"I think in general markets around the world will see it as something that probably leads to a little bit more inflation and a little bit higher interest rates."

The Magnificent Seven

According to Puff, most of the Magnificent Seven, with the exception of Apple and Tesla, will "enjoy very healthy growth in their core businesses as the outlook continues to be favorable" under a Trump presidency.

However, he noted that one of the defining characteristics of US equity markets is the concentration of returns in a very small portion of the market represented by these companies.

Meanwhile, the rest of the market, which is more dependent on growth in the real economy, has struggled as global economic activity has slowed.

"I think looking forward, as inflation continues to decline, as interest rates come down, the outlook for global economic activity will stabilize and begin to accelerate again," Puff explained.

"I think these conditions are prerequisites for the rest of the market to participate more in the equity markets, and I would expect market participation to widen as growth improves as the part of the markets that is more dependent of the main real economy is improving over the next 18 months.