Trump Victory Markets Stable For Now

Trump Victory Markets Stable For Now.

Across the board, all developed nation stock markets bounced back from their instant falls after the election victory in the US by Donald Trump.

Why is this?  Fundamentally, nothing has changed, Obama remains President for the time being until President-elect Trump is inaugurated in January.  Article 50 for UK Brexit has also not yet been triggered.

We simply do not know what is coming but we know the next 5 years could be quite unstable.

In the UK, Brexit could be a long and rocky road, we are yet to see the UK or EU’s negotiating position, so no one can call whether this will be a so-called ‘hard or soft’ Brexit.  We believe it is likely to be a soft Brexit with some, but not much, restriction on people movement and the UK still paying a similar fee to the EU to access the single market.

In the US, Trump promised to be tough and put the USA first.  How this will play out we do not know.  He has said he will dismantle the free trade agreements to protect US jobs from cheaper imports.  These are much like the European Union economic free trade area without EU laws or free movement of people.

• The North American Free Trade Agreement (NAFTA), a trade agreement with Canada, Mexico and the USA.

• The Trans-Pacific Partnership (TPP), a trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam.

• The Transatlantic Trade and Investment Partnership (TTIP) with Europe is not even agreed yet and will likely to shelved.

Already, Mexico and South American markets have taken a hit.  Clearly, Trump and these vote winning promises to become more protectionist and only arrange individual trade agreements that can benefit the US, has the capacity to upset many, many nations and could lead to trade wars and more, particularly with his attack on China and vowing to stamp out currency exchange rate manipulation for Governments to make their goods cheaper in the US.  Could the World’s two largest economies i.e. the US and China enter a trade war?

For Russia, Putin welcomes Trump and Trump welcomes Putin.  Does this mean a period of increased joint military activity in the Middle East?  Oil, Oil, Oil, that is what this is all about.  What it means for global economies though is instability.

Comment

For now, we believe it is a short window of stability to be followed by a sustained period of instability across the globe.