Who would have thought that a Republican candidate who has never had an affiliation with politics could go ahead and be the 45th President of the United States? Donald John Trump has proven all his critics wrong and has been elected as the 45th President of the United States. It has been one hell of a ride for the 70-year old as people constantly mocked his candidacy and campaign trail. Things got serious when he became the official Republican nominee by defeating Marco Rubio and Ted Cruz and making them withdraw their campaigns. It’s not been easy for Donald Trump with all the criticisms he has faced for his comments on Mexicans, immigration, sexual assault etc., but he has somehow come on top of it and given voters hope of ‘Making America great again’ which has been his campaign catch line since January 2016.
Known for his business acumen, money making skills and infamous reality show The Apprentice, the billionaire businessman’s journey to the White House has been far from easy. Donald Trump was never expected to win during the pre-election polls, debates or even before the day of final result. Trump floated the idea of running for president in 1988, 2004, and 2012, and for Governor of New York in 2006 and 2014, but did not enter those races. As far as his experience in politics goes, Trump has not had any experience in office at any positions, and he has changed his party affiliations with time being a Democrat at times and even a Republican when needed. He has always shown his support for the country over a particular party in many interviews and has talked about how America needs various reforms.
Trump’s policies and their effects on the market
According to an analysis from the conservative Tax Foundation, Donald Trump’s latest plan would cost the US government about $5.9 trillion in revenue over 10 years. Mr Trump’s current plan includes reducing the number of tax brackets from seven to three, cutting corporate taxes, eliminating the estate tax and increasing the standard deduction for individual filers. According to the Tax Foundation analysis, the top 1% of earners would see their income increase by double-digits, while the bottom quarter gets a boost of up to 1.9%. Donald Trump has said he will create 25 million jobs over 10 years, with claims that too many jobs, especially in manufacturing, are being lost to other countries. He plans to reduce the US corporate tax rate to 15% from the current rate of 35%, and suggests that investing in infrastructure, cutting the trade deficit, lowering taxes and removing regulations will boost job creation. Could this be one of the key factors that led to Donald Trump becoming the President of the United States?
On the other hand, he has invited controversy with his comments on wanting to build a wall on the 2,000-mile US-Mexico border and called for reductions in legal immigration, ending President Barack Obama’s executive actions deferring deportation proceedings for undocumented migrants, and more stringent efforts to reduce the number of these migrants living in the US. Despite this, reports indicate that Trump became President-elect by a substantial margin over Clinton.
Call Levels Users React
Source: Call Levels
Throughout Election Night, data from Call Levels suggested our own users setting remarkably vast upsides for Gold the day of the election, with Call Levels set all the way up to $1,400.
Source: Call Levels
Here is a brief look at how users from Call Levels set their Eurodollar (EUR:USD) rates varying from 1.10 all the way to 1.25 with most users predicting the EURUSD range from 1.125 to 1.13!
How have the markets reacted and how will they react further?
Analysts from CNBC had predicted a fall ranging from 3% (low) to 12% (high) in the market as soon as Donald Trump was announced President and the results have been similar. The value of global stocks has already dropped around US$3tn (at the time of writing). US stock futures fell around 4.5%, throughout Europe and the UK stocks are down around 4% to 5%, while Japan is down over 5%. The main reason? CNN reports, “Markets hate uncertainty — and many investors believe Donald Trump’s unpredictable nature and anti-trade stance could bring lots of global uncertainty if he wins the presidency, which he has.” “Shock and awe would aptly describe movements of global markets right now,” said Matt Simpson, a senior markets analyst at ThinkMarkets.
Yesterday (7 Nov), after Hillary Clinton was cleared by the FBI for the e-mail probe, the Mexican Peso had risen by 5%, but with Donald Trump being elected President the Mexican peso plunged more than 10% to an all-time low, after seesawing violently all evening as Trump started pulling ahead in key battleground states. As far as the news on assets go, investors turned to assets that are seen as safer bets in times of uncertainty.
Here is a live look on how the markets have reacted to U.S. Dollar, Mexican Peso, Japanese Yen, Gold, Brent Crude and 10-Year Treasury Yield ever since the poll results started coming out since the last few hours. The rise and fall in the prices have stunned the market.
Markets are said to be moving like Brexit 2.0 by Bloomberg and the volatility in prices of assets in the market since the election of President Trump have been very heavy.
We also talked about Janet Yellen’s speech in this article and with Trump’s victory, the estimates for her Fed-Rate hike have tumbled. People expected Fed rates to hike in December, but it doesn’t seem likely anymore as the markets are down and with such volatility, the rate hike seems to be on hold.
As far as how the American markets have reacted, it might be fair to conclude that the charts provided by Bloomberg below display the anxiety mirroring the voters’ mood during the election:
All the above mentioned updates are market news reported as soon as Donald Trump was announced as President-elect. But, what’s next as he takes office in January 2017? Financial Times reported, “would in all probability be a good outcome for the US economy, although it has plenty of political impediments. The inflation and higher rates it brought in its wake would be horrible for bonds. Although, if Mr Trump is somehow able to follow through with his plan to default deliberately on US treasury debt, we can expect something like market Armageddon.” The predictions have been right so far and the markets have tumbled. Slowly they will recover, but what the long-term has in store can only defy imagination.
While people in Moscow are expected to wake up to good news because of warm relations that are expected between Donald Trump and Vladimir Putin, there are heavy questions from Japan, South Korea and Mexico as to whether Donald Trump will really work with them. As far as markets go, Dow futures have plummeted more than 800 points, or 4.4%. That puts the U.S. market on track for its biggest percentage decline since August 2011 when they plunged 5.5% after the U.S. credit rating was downgraded. Stock indexes across Asia were also deep in the red. Japan’s Nikkei plummeted 5.5% and the Hang Seng in Hong Kong dropped around 3%.
Here are a few final views on which directions assets are headed over the coming week as reported by Bloomberg:
U.S. Dollar: Will be down versus developed countries especially like that of Swiss Franc and Yen, in flight to safety. Up against others, especially emerging ones on protectionism fears, with Peso taking the biggest hit. Later, greenback may strengthen on tax cuts, spending increases.
Stocks: Expected to be negative with increased volatility, especially rate sensitive equities. Long term infrastructure stocks will outperform.
U.S. Treasuries: Initial flight to safety would drive prices up, yields down. Tax cuts and spending may later shift money to equities, pushing bond prices down and yields up.
Commodities and Energy: Very positive for Gold, other precious metals as havens. Copper may rise on infrastructure stimulus.
Emerging markets: Negative, except for Russia, due to skepticism on trade deals. Mexico, Middle East, South East and China maybe most vulnerable. India, Indonesia less due to robust economies.
What happens next can only be known as time passes and as the policies of Donald Trump kick in and President Trump takes charge. But, the markets are going to have to deal with a period of high uncertainty for a long time. Will we face another Black Swan event or will Donald Trump work with the people to give America a ray of hope they had elected him for?