Trump – Only time will tell

In a not so surprising outcome Donald Trumped Hillary Clinton to win the American Presidential Election.

In the wake of his election victory we have seen Australian commentators predict:

• Trumps economic plan will send interest rates soaring in America, meaning the Australian dollar could fall and Australian mortgages become more expensive.
• The Australian share market will dive with the election results having an immediate negative impact on Australia’s market.

On a more positive note, they are also saying:

• Trump’s long term impact on Australia will be minimal
• Australia will be able to weather the storm

But what does this mean for Australia investors now? What happened to our Share Market?

Trump winning has resulted in dramatic financial market turbulence in the short term, given the candidate’s controversial announcements on international trade. We saw this volatility when financial markets posted one of the most stunning turnarounds in history after a global meltdown in the wake of Trump’s victory saw $35 billion wiped from the ASX.

However don’t despair – remember Brexit? Equity markets sold off in the following few days but quickly regained composure to deliver some of the best performances of the year.

The longer-term impact on the market will be dictated by the performance of his economic policies. Some Australian investors fear we could be badly burnt if Trump’s economic and trade policies result in global tariff rises and restrictions on imports and exports around the world. Australia has a long-standing relationship with China and this may be where we will feel the effect of a Trump Presidency the most.

While we can’t be certain what the future holds, knee-jerk reactions to events can be costly to wealth accumulation and are best avoided.

And as for our Share Market, just one day after Trump was elected as the next US president, Australia’s share markets bounced back.

Jim Farrell
Senior Financial Adviser

Posted on November 15th, 2016