HOW IS TRUMP’S WIN AF­FECT­ING MAR­KETS?

How will Don­ald Trump’s vic­tory im­pact fi­nances and in­vest­ments?

7 Days in Dubai - - FRONT PAGE -

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.”

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

CUR­REN­CIES

av­er­age re­turns of 82.7 per cent un­der a Demo­cratic pres­i­dent, com­pared to the 44.8 per cent av­er­age re­turns un­der a Repub­li­can govern­ment.”

“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.”

‘By vot­ing for Trump, the US has es­sen­tially taken a gi­ant leap into the un­known.’ – Hamzah Shalchi

IM­PACT: Trump’s win could bring un­cer­tainty to the mar­kets

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