How Does Trump’s Presidential Election Impact the Markets?

It’s time for a President Trump. Donald Trump opponents can say he’s “not my president,” but the money doesn’t think the protests will result in a different head of state.
It’s time for a President Trump. Donald Trump opponents can say he’s “not my president,” but the money doesn’t think the protests will result in a different head of state.

After Donald Trump was elected to become the next President of the United States, the markets quickly reacted, as they always do. In the short term, Trump’s victory might mean a sharp decline in the global stock markets followed by slight volatility.

While the bulls continue to currently stay strong in stocks, there are three reasons why analysts believe Trump will inevitably cause a downfall in the markets:

  • Important decision-makers are frightened about Trump’s political inexperience and temperament, and what he might do.
  • The core of Trump’s campaign revolved around his protective economic policies.
  • The final reason is simple: The stock market is just ready for a downfall.

Trump’s Impact on the Forex Market

Foreign exchange traders will likely flock to “safe-haven currencies.” This sounds fairly obvious, but how will we know which currencies will be safe investments? The US dollar will probably not be a safe bet, and just assume the dollar follows the US stock market’s lead to a decline. With this said, currencies that will benefit the most from Trump’s presidency will be the Swiss Franc, Japanese Yen, and of course, as always during times of economic uncertainty, gold and silver will also likely rise.

Currencies that will struggle under Trump are most likely the Australian dollar, New Zealand dollar and the Canadian dollar, with CAD being viewed as the weakest of the three. The Euro will probably rise against the US dollar, while the British Pound will march to its own drum, driven mostly by Brexit-related happenings.

The Bigger Picture

The assumptions above are possible short-term outcomes. Forecasting the market’s long-term outcome is a little more difficult to anticipate, especially when a new President enters the picture. But even so, at this point it’s safe to say that Trump, once inaugurated, will invite major sellers into the stock markets, which looks like it may be ready for a fall anyways, so Trump’s presidency may only accelerate a potential nose dive.

For predicting a long-term market outcome, we need to evaluate the possible decisions the Federal Reserve may make in the event that the markets begin to suffer. Since the US markets have only continued upwards since it was announced Trump had won, it’s safe to assume the Fed’s will still follow through with their plans to announce a rate-hike in mid-December.

But anything can happen in the markets in the span of a few weeks, and so much of how the markets will behave under Trump’s tenure will ultimately be decided by his first 100 days in the White House. Unless Trump announces a bombshell that shakes the markets, expect the markets to continue to climb — but look for any reason for the markets to fall and a fresh downtrend to begin.