After the American public voted in Republican nominee Donald Trump as President-elect last week it sent shockwaves through politics and the global financial industries.
With such a surprise result and with any change in political direction creating uncertainty, the result will undoubtedly affect world economies and, ultimately, the investments of residents in the UAE and the Middle East.
Here, Hamzah Shalchi, regional manager at Guardian Wealth Management, reviews the predicted financial impacts.
STOCKS
“In the run-up to the election, when it became clear that the result was no longer a given, markets had begun to react and thus, both stocks and bonds moved lower. How markets will react in the coming weeks is unsure but Barclays predicted that the S&P 500 would nosedive by between 11 to 13 per cent in the event of a Trump victory.”STOCKS
BONDS
“The US benchmark 10-year yield has only recently recovered from the 39 basis points (0.39 per cent) fall inflicted by the Brexit vote. Now experts believe the benchmark could slip at least 10 basis points (0.1 per cent) again, although Trump’s planned tax cuts and infrastructure-spending could, in time, drive them back up.
“Energy industry bonds are likely to rebound after two years of major losses thanks to Trump’s public support for fossil fuels. History tells us that the stock market performs better under a Democratic president.
“Over the past 100 years The Dow Jones Industrial Average has produced average returns of 82.7 per cent under a Democratic president, compared to the 44.8 per cent average returns under a Republican government.”
CURRENCIES
“As Trump continued to gain on Clinton in the election results, the US dollar began to fall against the British pound, euro and Japanese yen and this is expected to continue as uncertainty hits the market over fears about his policies. For example, immediately in the hour following the election results, the US dollar plummeted by around 4 per cent only to recover slightly post-Trump’s victory speech.
“By voting for Trump, the US has essentially taken a giant leap into the unknown and historically such moves have a negative impact on the relative value of currencies. “As the UAE dirham is pegged to the US dollar, it is likely to be impacted by the fluctuation against developed currencies such as the British pound and Swiss franc.”
COMMODITIES
“In times of uncertainty, nothing glitters quite like gold. Investors looking for safe-havens often turn to precious metals such as gold, silver and platinum when the value of the dollar falls against other currencies. “Additionally, natural gas prices will fall and oil prices could get a lift.”
WHAT’S NEXT?
“Whether it’s a slight ripple or giant shockwaves, investors can be certain that whatever happens next in the US will impact the whole world. “It is difficult to predict what markets will do next, however, remaining invested through periods of volatility can provide stronger returns than attempting to second guess what will happen.”
Source: 7days
Source: 7days
