Shares bounce back from Trump shock
Sharemarkets around the world continue to rally following an initial dive after Donald Trump’s shock US presidential victory.
The NZX 50 was up 1 per cent for the week as of yesterday, a quick turnaround from Wednesday’s losses as Trump was elected.
Even on Thursday morning, the sharemarket surged by more than 3.3 per cent shortly after opening.
The New Zealand sharemarket came off 3.34 per cent on election day, the largest day of movement since October 2008.
Markets in the United States surged to levels not seen in years, while shares in Asia snapped back remarkably after the initial sharp recoil.
Hamilton Hindin Greene investment adviser Jeremy Sullivan said the latest official cash rate cuts and lower interest rates were an advantage for New Zealand and helped the sharemarket rebound.
Investors worldwide were also less wrapped up in the emotional reaction to Trump as US president.
US investors opted to focus instead on his key policy priorities, which include generous tax cuts and higher infrastructure and defence spending, along with deregulation for banks.
‘‘It’s worth noting Trump himself is pro-business and he would be looking to use increased deficit spending to fund infrastructure projects,’’ Sullivan said.
New Zealand investors should keep a medium to long-term outlook on the markets and keep in mind there was still strong economic growth, he said.
Much of the local market would not be affected by Trump’s presidency.
‘‘Markets have been through worse things than this: the Great Depression, World War I, World War II, the Cold War,’’ he said. ‘‘And they’ve all come out the other side and do tend to be very future-focused.’’
Harbour Asset Management director Mark Brown said that if Trump brought in any protectionism with his trade policies, a higher level of inflation than expected might result.
Trump has promised to build a wall along the Us-mexico border to halt undocumented immigration, and to rewrite or scrap the two-decade-old North American Free Trade Agreement between the US, Mexico and Canada. He has also been highly critical of US trade deals and adamantly opposes the proposed 12-nation Trans-pacific Partnership Agreement.
Brown said there would be some sensitivity around the world to interest rates rising, so this may become an issue at some point.
There could be further uncertainty if the US did become more isolationist as a result of Trump’s policies, but for now, it was wait and see.
Craigs Investment Partners analyst Mark Lister said that if Trump’s policies did lead to higher inflation, Kiwis could expect mortgage rates to increase and probably keep going up next year.
Despite the quick recovery of overseas markets, it would not be a surprise to see the initial positivity waning in the near future. –with Reuters