A Trump victory was marginally anticipated by the markets but there was a fair degree of repositioning of assets across international markets in the days leading up to the election, as the polls showed that the decision was on a knife edge. The reality was somewhat different!
The main focus of this update seeks to evaluate what a Trump administration means for the future direction of investment markets. We’ll also touch on the news that yesterday, the bank base rate in the UK has been lowered for a second time this year and this was followed by a similar announcement in the US.
On the day the election result was announced, I had a few chats with people who seemed surprised that equity markets responded positively. The word ‘markets’ is a term which is used loosely and often people are referring to the FTSE 100, which as we know is a narrow range of sectors with circa 70% of company earnings coming from abroad.
Markets react to fundamentals and US equities responded positively. US treasuries (bonds) however sold off due to concerns about the fiscal debt and inflationary measures. UK and European markets rose strongly at the outset but as the news was digested, indices gave up their gains over fears around trade and tariffs.
It will be interesting to see how performance diverges across sectors and geographies over the next few weeks and months. Trump’s victory and the margin of it, has sent shock waves around the world. The uncertainty of a Trump tenure is expected to bring heightened volatility. Undoubtedly, there will be more protectionism, trade wars and more active engagement in geopolitics.
Trump is seen as being pro-business and pro-growth. His commitment to lowering taxes will boost US equities in the short-term but much depends on how the economy responds to Trump’s anticipated stimulus.
So, on our agenda this week:
- The general view
- The climbers
- The fallers
- Trade wars and inflation?
- Interest rates fall
- Summary
The general view
Trump’s election is historic and remarkable in many ways!
- Some commentators are speaking of a new world order as Trump pulls up the drawbridge to many countries. However, he also wants to act as a mediator, peacemaker, and problem solver, with the Ukraine/Russian conflict high on his agenda. The Middle East conflict hasn’t shown the US in the best of lights when dealing with Israel. He will certainly make his feelings known.
Continues…
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Risk warning
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.
