9th November 2016

What does Trump's election mean for markets?

Donald Trump has won the race to the White House and will be the 45th president of the United States of America.

As news of his victory in the key states of Ohio, Florida and North Carolina filtered through and his lead grew, markets around the world reacted. The Nikkei 225 dropped considerably before recovering and US Futures also suffered while the Mexican peso reached record lows. The FTSE 100 dipped as did the S&P 500 which suggests a Trump victory wasn’t priced into markets.

Michelle McGrade, Chief Investment Officer at TD Direct Investing, shared her views on Mr Trump and the effects his leadership could have in the short term:

“It is likely he will reinvent himself (history shows he has great capacity to change to suit the environment) as he will no longer need to be the showman but will have to become the manager - the savvy businessman that voters think he is.

“It's thought that he will announce stimulus measures to buoy up the domestic economy and there is talk of infrastructure projects. So US domestic businesses could flourish in an environment of tax incentives particularly the US domestic oil sector.

“Foreign countries, foreign companies and importers could be treated less favourably and as a result the US dollar may fall because the rest of the world distrusts him.

“While this may be good for people holidaying to the USA and buying from the USA this will be a shame for the UK which is currently enjoying a boost with tourists flocking here because of our cheaper shopping market.”

It’s important not to make any rash decisions

The UK market will suffer a knee-jerk reaction and we expect exporters, most of the FTSE100 and the market champions since Brexit, to fall on the back of a weaker US dollar and weaker exporting prospects. Emerging markets, especially in Latin American, could be in turmoil.

Ms McGrade also shared her thoughts on what this could mean for investors:

“There will be lots of noise and political propaganda over the coming days that may cause you to question your investment decisions. While it is good to review your portfolio at these times of heightened volatility, it is important not to make any rash decisions.

“When markets fall they usually represents opportunities to buy not sell; and with this shock there will be time to think and plan.

“The market volatility following Trump’s victory will lead to short-term trading opportunities so it will be worthwhile having some cash available to make the most of these; should this fit with your investment strategy. But the longer-term investor should hold their nerve and see how the dust settles.”

Over the course of the next few days there are bound to be ups and downs but we're here to help you make sense of the impact and what it means for investments. Don’t forget to check our US Market News for all the latest updates.

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