Markets after the Trump Victory.
Finally the victory was to Trump. The election of Donald Trump shocked the world, injecting uncertainty into the minds of the investors. You need to go back to 2008 to find a stock market reversal to rival that of the last 24 hours, in which S&P 500 Index futures erased a 5 percent loss triggered by Donald Trump’s surprise presidential election win. Bigger turnarounds only happened three times before, twice in the final months of 2008 and the other in October 1987. Stocks turned higher on Wednesday as speculation the Republican will pursue business-friendly policies offset some of the broader uncertainty surrounding his ascent.
Donald Trump’s surprise win has sent shockwaves across the world, with many wondering how the new leader will reshape America’s foreign policy. But the tax reduction was one of Trump’s key campaign pledges, with the newly elected U.S. leader arguing the cuts are essential to repatriate capital and businesses.
While Trump’s victory was initially seen as the less favorable and higher risk option for the markets, it was always going to present opportunity for the markets, I’m just not sure people quite expected that value to materialize quite so quickly. Trump’s speech following the victory was hugely influential in yesterday’s sudden U-turn, as he focused more on unity and the need to spend to get the economy growing again. These policies combined with his desire to deregulate and lower taxes are all very market friendly.
European equity markets opened around 1% higher today, advanced for a fourth straight session to a two-week high on Thursday, led higher by miners and banks, and following a stunning rebound late on Wednesday, as initial risk aversion to Trump’s election subsided and investors seized on the opportunity. The U.S. stock index futures are also trading higher, after strong overnight gains on Wall Street, so in conclusion we can see that Donald Trump is not so bad to the economics of the US. The stance he takes on trade will likely determine how vulnerable the markets are but in reality, these are very long term policies and for now, markets are more focused on the prospect of lower taxes, fiscal stimulus and less regulation. It was important that he stuck to these messages rather than the more protectionist policies. As long as he continues to do so, the market will likely continue to respond favorably.
The effects of Trump elections also take a place into the forex markets, we are expects the dollar to do well, in particular against the euro. Now the eur vs usd is going down again, and is possible reach the $1.05 for euro versus dollar by end of year but a move towards parity with in 6 to 12 months is entirely possible. In short term the level of the resistance is at 1.095.
Graphics by: www.etoro.com
The downgrade came out prior to the election results, but it’s mostly a valuation call, so JPMorgan’s saw big move yesterday +5.8%, and the expectation for the future of his stocks is still doing very well.
Graphics by: www.etoro.com
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