US Election: Market Update

Just as the financial sector has mostly recovered from the shock of Brexit, it is once again undergoing stress as a result of Donald Trump being elected President of the United States. Dr Shane Oliver from Oliver’s Insights has shared an update with AMP, summarised below.

Trump’s victory is already having an effect on the global financial market, but what does this mean in the short- and long-term?

The key policies that will have an effect of the market are Trump’s most controversial:

–        Trade

–        Regulation

–        And Foreign Policy

It is likely the US economy will get a boost if Trump’s combination of big tax cuts and increase in defence and infrastructure are put into force however this will blow out the US budget deficit.

The Australian market is especially vulnerable as it has a high trade exposure, and Trump proposes to renegotiate free trade agreements, as well as implement protectionist policies. The risk we face in these protectionist policies are the possibility of a trade war and higher consumer prices. As Australia is more reliant on trade than the US, this puts us in a susceptible position.

There has already been an initial dip in the market with the announcement of Trump’s success however beyond this reaction share markets are likely to settle down. Ultimately the extent of Trump’s impact on the market is dependent on the type of President he becomes – as Dr Shane Oliver puts it, “much will ultimately depend on whether we get Trump the pragmatist or Trump the populist”. We can expect American Congress to take some of the edge off of Trump’s policies however to what degree is uncertain, as well as how long this could take.

With Brexit there was rampant concern of what a Yes vote would mean for the global economy, however after an initial knee jerk sell off the markets soon evened out. We have now begun to see a similar result, with post-election markets actually ending higher.

View Dr Shane Oliver's full review here:

And as always please contact us for any advice or assistance.


Published : 10 Nov 2016