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‘Calming’ Trump speech could see markets close higher

Wednesday, November 9, 2016 6:41
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Donald Trump’s win over Hillary Clinton came as a shock to most people this morning – including traders and investors – with commentators predicting a Brexit-style collapse as a result.

The ‘mass destruction’ initially predicted never materialised, and Trump’s victory speech has been credited with calming the financial markets.

“[Trump has] given this victory speech and sounded like a very different man compared to the person who was campaigning and being very controversial,” City Index’s Kathleen Brooks tells Proactive.

“He seemed very Presidential when he gave that speech and the opposite of controversial.”

The conciliatory tone could also lead to the FTSE recovering all of its initial losses to actually finish the day in the black.

“[UK stocks] have almost completely erased a lot of the losses that were being priced in earlier during the results.”

“[They] are now only slightly in the red and they could easily close up higher, and we could also see that with US stocks as well.”

Asian stocks took a hammering overnight as the uncertain election results loomed large, but Brooks expects these losses to be reversed tomorrow.

“Asian markets had a bit of a problem [in that] they actually closed before Trump was actually announced before he did his speech which seems to be what has been calming the markets.

“If you look at the futures market, they are expecting a very high increase in the Nikkei tomorrow.”

While the public is still cautious about what a volatile Trump might do once he officially comes to power in January, Brooks reckons his Republican party will keep him in check.

“Trump is still very different to a lot of the Republicans in Congress so they may still limit what he can do.

“Particularly the more extreme elements around things like immigration and building a wall and potentially also trade tariffs which I think a lot of Republicans would oppose if it was to come through the Congress.”

As for interest rates, Brooks doesn’t expect there to be a significant change in the Fed’s policy, and thinks a December hike is still likely.

“Looking at the market’s interest rates probabilities and the Fed funds futures, there had been an 85% chanced priced in yesterday that the Fed would hike in December,” the analyst says.

“That then fell back to 50% during election night when the results were coming out and it’s now back to where it was yesterday… [so] maybe the Federal Reserve will do what it has to do in December.”

Story by ProactiveInvestors


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