An eventful week draws to a close. There was nothing ambiguous about the market reaction to Trump’s decisive victory in the US election. The financial landscape in general will be grateful for the clarity of the result this time round, but looking at specific markets paints an even clearer picture. The Dollar is up significantly, as are US stock markets, not to mention cryptocurrencies. Tesla (TSLA) also rose sharply following the result, as did a number of tech-related stocks. Safe-haven assets such as gold on the other hand saw heavy selling pressure.
So where are markets headed moving forward? One of President Trump’s characteristic traits is of course his unpredictability, nevertheless some predictions can be established with relative confidence. Trump is expected to enact more protectionist measures, imposing additional tariffs on Asia and Europe with the aim of prioritising US-based manufacturing. He is also widely expected to lower corporate income tax and introduce policies to ease tax burdens in general. Finally, the president-elect is expected to reduce regulation across the board but particularly in the technology and financial fields.
As we have already seen in the crypto markets, that latter point may have the most immediate effect. It is very possible that the SEC will experience a significant reshuffling in the months following inauguration and for the crypto industry this cannot come soon enough. Cryptocurrencies have suffered through a total lack of guidance in recent years, almost begging for clarity from regulators but receiving nothing but punitive measures in return.
Inflation is one of the bigger questions. Many analysts claim that a Trump presidency will ramp up inflationary pressures, which is something that the Federal Reserve will have to contend with. Central banks around the world have only just started lowing interest rates, the Fed and the Bank of England doing so again just yesterday in fact. That being said, the change of the guard is still over two months away and the deeper structural changes will obviously take time to manifest.
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