STOCK MARKETS
The US election is only days away and the result could soothe or shock investors and corporate New Zealand. Matt Nippert, Liam Dann, Grant Bradley and Hamish Fletcher look at what it means for you
The results on Wednesday from the United States presidential election will either see markets sigh with relief over business as usual, or drive panic exceeding the shock of Brexit, say market- watchers in New Zealand.
There are no prizes for guessing which candidate, of Democrat Hillary Clinton and Republican Donald Trump, is considered the wild card.
Mark Lister, of Craigs Investment Partners, said market sentiment suggested a Clinton victory had been largely priced in.
“If Hillary wins, it’s business as usual. Shares will probably rally 2- 3 per cent and there will be general optimism and relief from many quarters,” Lister said.
But the volatility of Trump — in temperament and policy positions, as well as the lesser possibility of him winning — would see markedly larger effects were he to set up shop in the White House.
Lister said although the odds weren’t great for Trump, his chances shouldn’t be discounted and people perhaps should give thought to bracing themselves.
“The smart money i s still on Hillary, but I’m picking it to be a close one, tighter than the polls and financial markets seem to be implying. Buckle up people,” he said.
Lister characterised the likely response to a Trump victory as “Brexit version 2”.
“Markets will be caught by surprised. My guess is that share prices fall 10 per cent,” he said, picking a flight to traditional safe assets such as gold and the Japanese yen.
The flow- on effects to New Zealand would be muted by distance, but as Brexit showed, triggering a 5.3 per cent slide in the NZX, global confidence i s a key underpinning of all equity markets.
“New Zealand will be a little shielded from all this, since we’re quite far away and things are going very well here economically. But we won’t be immune, and anything, or anyone, that reduces trade is bad for New Zealand since we are so dependent on it.”
Stephen Bennie of Castlepoint Funds, while in agreement that Brexit is a solid point of comparison, gives a reading of Trump’s character that suggests more muted consequences.
Noting that global equities recovered quickly from an initial postBrexit slide, Bennie said Trump’s bignoting personality may not be matched by big changes in policy.
“My expectation i s that Trump would become besotted with the trappings of being president. His vanity would consume him, leaving little time to actually do anything,” he said.
Bennie said Trump didn’t even raise his flagship wall- building policy during a trip to Mexico: “For Donald it appears that talk is cheap and action is rare. His impact on world trade may end up being extremely limited.”
A global trade war would be bad news, although given concerns around Trump taking control of the US military, it may not even be the worst- case scenario.
However, weaker prospects for NZ exports might be offset by a lower Kiwi dollar, notes First NZ Capital analyst Chris Green.
Somewhat perversely for an allegedly right- leaning Republican, economists are expecting Trump’s policies to be inflationary.
That means that in the medium- to long- term they may be supportive of the US dollar and result in a faster track for US rate rises and potentially higher long- term interest rates in New Zealand. The proviso to that would be how serious any short- term market crash i s. A major global meltdown may require further stimulatory action by central banks.
In the end, the best case scenario in a Trump presidency would be that he ends up hamstrung by internal politics. Without support from many free- market Republican representatives or the Democrats he may be unable to get any major economic policies through Congress.