Donald Trump’s shocking victory is causing financial markets to go haywire. Stocks & metals surged as optimism spread about his fiscal-stimulus plans. The dollar also gained against its peers, fueled by speculations that Trump’s wild spending will lead to inflation. On the other hand, bonds tumbled & Latin American equities shuddered. This surprise victory has left the world with their jaws open. Even though this may seem like the end of the world, it could bring about more positive changes than expected. Only time will tell if Trump’s bold plan to stimulate the economy will come to fruition.
Stocks Fluctuate After Trump Upset
“We see a higher and more balanced inflation forecast and more rapid normalization of policy,” Scott Mather, chief investment officer for core strategies at Pimco, wrote in a note. “This means the Fed will move faster on rate increases than the market had been pricing for in the year ahead,” he said, adding that he expects “two to three rate hikes before the end of 2017.”
Despite many doomsday prophecies, the financial market is still barley on track. The Down Jones Industrial Average reached record heights while the MSCI All Country World Index erased its monthly decline. MSCI’s global gauge soared by 0.2%, & the S&P 500 Index mirrored this 0.2% growth. While the small-cap Russell 2000 Index enjoyed a 5 day rally that put them at 8.2%. The Dow Average also jumped 218.19 points. Banks & health care shares joined industrial shares in a surprising recovery.
Many experts attribute these gains to Trump’s plans to revamp the US economy. During the election he promised to double the $275 billion 5 year building plans of Hillary Clinton. After vowing to make infrastructure the number one priority, this may be exactly what the economy needs. He also hinted that he would lower taxes & roll back regulatory scrutiny. These are all great plans, but until he acts these are hollow promises.
Following this outrageous election precious commodities also recovered. Copper made history with its biggest back to back surge in three years. After jumping 3.5%, copper held steady at $5,601 a metric ton. This wild rebound pushed the relative strength index to 90, the highest since 1986. Lead, zinc, tin & aluminum joined this valiant comeback.
Faced with plans for expansion, the dollar soared amongst its peers. The Bloomberg Dollar Spot Index advanced 0.9%, reaching its highest level since March. This raised the greenback by 1.1%, setting it at 106.87 yen & adding 0.2% to $1.0890 per euro.
Trump’s election may have boosted the US economy, but it is wreaking havoc on Latin America. His cowboy approach to Hispanic immigrants is causing panic throughout Spanish speaking countries. He pledged to protect American workers from unfair trade deals, & this could lead to a trade war. Since they get 80% of their oversea sales to the US, this could be detrimental for Mexico. Colombia & Mexico’s currencies both fell 3.7% in the wake of this controversial election. Brazil’s real also hit its lowest point since 2008, signifying that South America is far from optimistic about this new president.
In the end, Trump is a wild card. His views on immigrants have generated countless foes, but despite outraging half the planet he still beat Hillary. Hopefully these remarks were nothing more than playful bravado to get an edge on his corrupt opponent. His economic plans appear to be positive for America, but their effect on the rest of the world remains to be seen.