Donald Trump the business man is now Donald Trump the President of the United States. As unexpected as his victory may be, millions of people around the globe now need to now grapple with this new reality. It is a reality that is filled with uncertainty.
On the day he won the elections, the S&P and Nasdaq futures went south, down 5% and other markets like Gold and of course the Forex market saw huge volatility. However, by Wednesday the U.S. markets managed to creep back up from the falls earlier while other markets continue to languish at their lows.
Trump have mentioned a few things that will affect the market and that market participants are anticipating. Trump plans for tax cuts and plan to increase infrastructure spending. This is believed to widen U.S.deficits and drive up interest rates. On top of that Trump have also threatened to increase tariffs on imports from China and Mexico and he has also mentioned things that seem to give the idea that he wants to insulate the U.S. from the rest of the world. If this is put into policy, we will see some impact on globalization.
The December rate hike by the Fed will also be thrown into uncertainty as the rate hike might be put on hold.
Many have also commented that Trump lacks experience running the government and this may lead to policies that are unconventional and a divergence from the political modus operandi of past governments.
A trade war launched by Trump may also set the stage for a weaker world economy. One which is already facing difficulties as it is with slow growth in developed countries such as Japan and the Euro Zone and decreasing demand worldwide.
However, we should not discount the fact that the pre-election Trump might differ from post-election Trump. He has to get the agreement of others in Congress before new laws and policies can be put into action. As such, we should not be surprised if a more pragmatic Trump could emerges.
The market’s fall on election day shouldn’t be a surprise to many as the same thing happened in the past. Usually, after that one day fall, we would see the stock markets make long term gains as time passes. Looking back, the market fell 5% a day after Obama was elected in 2008 but was up 14.9% a year later.
Even without Trump, the U.S. economy have been growing steadily the past few years and it is slated to continue its growth. Although we can expect some volatility going forward as uncertainties can and do impact on the markets, I would advise traders out there to stay cool and trade with a lower contract size for a while. Let the market go back to its usual ebb and flow before taking more risks.
To your success!
Pro Trader & Trading Coach
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