Mar­kets pris­oner of US pop­ulist rhetoric

The Star (Kenya) - - News Business - ALY KHAN SATCHU Aly-Khan is a fi­nan­cial an­a­lyst

US Pres­i­dent-elect Don­ald Trump cer­tainly up­ended poll­sters, pun­dits and the en­tire me­dia echo cham­ber, not un­like the Brexit vote. In fact, 24 hours be­fore the pres­i­den­tial vote and the Brexit vote, both out­comes were at four to one – a 20 per cent prob­a­bil­ity. This new pop­ulist Zeit­geist has legs and Marine Le Pen and Frexit, Italexit all look much more likely than ever be­fore. What is clear is that the In­ter­net has been a sig­nif­i­cant dis­rup­tor al­low­ing pop­ulist politi­cians to go over the top.

The nar­ra­tive is no longer con­trolled, it’s be­ing writ­ten as we speak and it’s be­ing writ­ten by the likes of Trump and UK In­de­pen­dence Party Nigel Farage. We are now at an in­flex­ion point and its plain to see.

The mar­kets are hav­ing to ad­just to a new nor­mal, which is very un­pre­dictable. It is this un­pre­dictabil­ity which is surg­ing volatil­ity in fi­nan­cial as­sets. The im­me­di­ate re­ac­tion to the Trump news was a big flight into what are per­ceived as Safe Haven As­sets. Gold, the yen and the Euro ral­lied sharply as in­vestors looked for a safe har­bour. The Dow Jones suf­fered its big­gest one day loss, and that was even be­fore it opened for trad­ing. The Mex­ico Peso which has ex­hib­ited a near 100 per cent in­verse cor­re­la­tion to a Trump win got smashed more than 10 per cent. The mar­kets are now a pris­oner of the pop­ulist rhetoric and I would have thought this new trend ac­cel­er­ates.

Africa was not men­tioned once in the three pres­i­den­tial de­bates, and it hopes to main­tain Pres­i­dent’s Emer­gency Plan For AIDS Re­lief (PEPFAR) and more re­cent Obama gains such as AGOA and Power Africa. I have to ex­pect a scal­ing back of US eco­nomic sup­port for Africa. I sur­mise that eco­nomic sup­port gets down­shifted and Africom and its counter-ter­ror­ism agenda up­shifted.

Pres­i­dent-elect Trump will surely re­set the geopo­lit­i­cal world or­der – he has al­ready spo­ken of be­ing able to get along with Pres­i­dent Putin of Rus­sia and the Baltic states, and Ukraine’s Poroshenko will be wor­ried that they might well be thrown un­der a bus. The geopo­lit­i­cal grand­mas­ter Putin is a very big win­ner. The ‘’rebels’’ in Syria who in­ter­est­ingly are not Syr­ian will surely be ex­tin­guished in a for­eign land, and Pres­i­dent As­sad has out­lasted another Amer­i­can pres­i­dent.

With re­spect to the eco­nomic or­der, it is clear Trump was car­ried to the White House on a wave of anti-glob­al­i­sa­tion. He will surely con­tinue to surf that wave and this will place enor­mous pres­sure on global trade. Trump will surely be an Amer­ica-first cham­pion. Mex­ico is at the bleed­ing edge, and that’s why we saw such an out­size move in the Peso. We have now en­tered a Trump Por­tal into a whole new nor­mal.

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