WHAT NOW FOR AUSTRALIA WITH A TRUMP WIN
The day of the US election result stock markets around the world crashed. The Australian stock market lost $34billion but then something very surprising happened.
The Australian stock market soon rallied to recover about half of these loses and amazingly on Thursday 10 November it had its BIGGEST RISE in a single day since 2011!?
Greg Canavan from Port Phillip Publishing said on 11/11/2016,
The fear of Trump has turned to hope. The Dow rose to a new all-time high overnight as the market digested the results of a Trump presidency. More spending on infrastructure, less regulation and the prospect of lower corporate taxes means ‘buy, buy, buy’! As far as Australia is concerned, the big winners from Trump are resources. The iron ore price has exploded. Whether that’s because of the steel required to build Trump’s insane ‘Great Wall of Mexico’, or something else, I don’t know.
The Daily Mail published an article on 10 November, “The Kremlin says a victory for Clinton would have sparked World War Three and electing Trump saved the world from Armageddon”
To emphasise this fact, from what we can see, Putin was the first world leader to congratulate Trump on his victory
Another of the unlikely first world leaders to congratulate Trump was President Pena Nieto of Mexico. He said soon after,
This election opens a new chapter in relations between Mexico and the U.S. that will imply a change, a challenge but also, I have to say, a big opportunity.
Mexico is still not planning to pay for Trumps wall but they plan to meet again before the inauguration and this signifies a much warmer spirit than previously thought possible.
These developments must allay the worst fears that have been voiced by critics.
US Steel has also responded by an initial increase in their stock value by 30%
To give a different perspective to this we could look at the CNN Money interview with Warren Buffett on 11/11/16. He is an avowed Hillary supporter and he is not complimentary of Trump as an economist but gives a balanced view that should steady anyone who worries about the future. Have a look at the link below from 9.11 mins.
And as a final word, Ticky Fullerton in the ABC’s The Business on 23 November said that in the US stock market all 4 indexes where simultaneously high for the first time in 17 years. This was explained more fully by USA Today on 22 November;
The post-election rally began two weeks ago with so-called “Red Stocks” ripping higher after Republican Donald Trump’s surprise win on Nov. 8. The rally, which has been fueled by hopes that the president-elect’s growth-friendly policies will finally jolt the U.S. economy out of its multi-year doldrums, has spread to virtually every corner of the stock market. It is the first time the S&P 500, Dow, Russell 2000, and Nasdaq all closed at a new high on the same day since Dec 31, 1999,” says Ryan Detrick, senior market strategist at LPL Financial.
The most recent small business optimism index figures released in the US show that confidence has increased 3.5 points since October making this the most optimistic that small business has felt since 2008. This is just another example of what is being called the ‘Trump Effect’.
The Glove and Mail reported on 8 December that since the election US over $1Trillion in value has been added to the US stock market.
The writers said,
Donald Trump is doing to U.S. equity bears what seven years of economic stimulus rarely could: shut them up. Two years of paralysis has for now ended in stocks, with more than $1-trillion (U.S.) added to share values since election day and the Dow Jones industrial average looking bound for 20,000.
And on a more expressive note,
For investors, the question is how much credence to put in analysts whose futility in sussing out president-elect Mr. Trump’s effect on share prices was rivalled only by the inaccuracy of political polls prior to his victory. Not only has he not been the disaster many of them warned about, the rally since he defeated Hillary Clinton is now the biggest for any new president since Ronald Reagan.
In WASHINGTON, D.C. it was reported on 13 December by Gallup that Americans expressed more positivity about the U.S. economy last week than they have at any other time during the entire nine years they have been tracking the U.S. Economic Confidence Index. They are calling it ‘Trumphoria’.
Put all of the positives and negatives together and I think most investors should feel a sense of hope for the future. Those who are more concerned with political correctness may not be so relieved but our interest is in finance.
Donald Trump wants to increase tariffs on foreign goods which should bring manufacturing back to the US and increase employment. Professional politicians love the concept of a global economy with open borders and markets but business people and investors like tariffs because when applied intelligently they will protect local markets and jobs.
BUT WE GIVE A WORD OF WARNING
At a rally on 26 September 2016 Donald Trump said something that no other leader would dare to say. But it was not some ‘off-colour’ remake about an opponent or a ‘politically incorrect’ opinion about a religion or minority for which he is so well known. It was an extraordinarily candid opinion about the existence of a ‘bubble’ in the US and world economies that show once and for all he completely lacks any pretence and this separates him from all the other stock standard, opportunistic politicians.
He was speaking of how slowly the US economy has recovered from the Global Financial Crisis in 2008 and how it is setting itself up for something worse;
We have the worst revival of any economy since the great depression. And believe me we’re in a bubble right now and the only thing that looks good is the stock market but if you raise interest rates even a little bit that’s going to come crashing down. We’re in a big fat ugly bubble and we’d better be awfully careful. And we have a Fed (US Federal Reserve) that’s doing political things … by keeping the interest rates at this level (for so long). When they raise interest rates you’re going to see some very bad things.
Trump could truly usher in a new era of prosperity if only he can fight off the forces of the Establishment and the Left who genuinely hate him. He has spoken ‘straighter’ than any Presidential candidate who has come before him because he is not a politician and the people love him for it but now we see that he has revealed some dark clouds that hang overhead.
If his predictions about a coming crash are true he may well be the first world leader to say so. An equal number of financial gurus would agree as would disagree.
Trump has however differed with most of the pundits by saying that the dark forces overhead are not just an unfortunate sequence of financial and world events but are steered by human intervention with dubious motivations.
Certainly we here at Adelaide South Property feel more secure knowing that there may be another human who can fight those forces working against us.
Let us know what you think.