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Victory for Donald Trump

Victory for Donald Trump

Much like the Brexit vote, the polls, the bookies and the financial markets all pointed towards a Clinton victory so the Trump win has wrong footed many investors.

In years to come it may be that historians and political commentators look back on 2016 as the year when the rise of anti-establishment politics really began.  Whether it be the vote for Brexit in the UK or the election of Rodgrigo Duterte as Phillipine President.  All this will surely be Trumped, in every sense of the word, by the election of a billionaire reality TV star to the highest political office on the planet.  This pattern may not be ending any time soon with elections due in major economies like France and Germany next year and signs that anti-establishment parties are also polling higher than expected.

In the short term however what does this all mean?  Global markets reacted badly in early trading the morning after but have since recovered which is similar to what happen after the Brexit vote. It is important to re-emphasise our belief that timing of the markets is impossible, we believe that time in the market is what matters.  Yes, investments will go down today, but they will recover, we just don’t know when this will be and you are more likely to miss the recovery than not.

The big moves have been seen in the currency markets with the USD down versus the Japanese Yen, the Euro and Sterling. However the biggest move has been in the Mexican Peso which has fallen 10% against the USD at the time of writing.

Now that the Presidential race has been decided, investors will be turning their attention to what Trump’s economic policies actually look like and these have been light on detail. Trump has made tax cuts a focal point of his agenda and talked about a policy for growth. Trump also made infrastructure spending a key part of his economic policy and we do know that this is one area that both Parties agree on. Its worth remembering that the Republican’s will have the majority in both the Senate and the House of Representatives meaning they control Congress.

However, the rhetoric from Trump’s camp is already more moderate, stepping away from some of his extreme comments. What Trump said while campaigning and what he actually does as President may be two very different things.

Its does seems certain that political uncertainty will continue and there will be implications for the forthcoming European elections. Markets don’t like uncertainty and political risk is very difficult to judge. The US remains one of the most dynamic and important economies in the world, and only in the most extreme version of a Trump Presidency which sees him ripping up trade deals and defaulting on government debt is this going to change. Once the dust settles then the markets will likely turn their attention towards other key forces that are driving the global economy and markets.

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