Asian, European and UK markets have all seen significant falls following the news that Donald Trump is to become the 45th President of the United States.
In the opening minutes of trading in London, the UK’s FTSE 100 index was down 82 points (1.2 per cent), following earlier falls in other major European and Asian stock markets.
Japan’s Nikkei 225 closed down by 5.4 percent at the end of Wednesday trading, but Hong Kong’s Hang Seng fared better, trading 2.9 per cent lower, with the Shanghai Composite closing down 0.3 per cent.
US stocks are also expected to fall sharply when trading opens in the United States.
And according to Joe Amato (pictured), President and Chief Investment Officer – Equities at Neuberger Berman, and Erik Knutzen, the firm’s Chief Investment Officer – Multi Asset Class, Trump’s election is likely to herald a prolonged period of market uncertainty.
In a statement issued early on Wednesday morning, Amato and Knutzen said: “Whereas Clinton was the ‘business-as-usual’ candidate, Trump is much less predictable. Regardless of what the longer-term impact of his policies will be on the economy, risk-assets are likely to respond with high levels of volatility in the shorter-term as we try to figure out what those policies are and how many of them are realistic. A December rate hike from the Federal Reserve, priced as almost a certainty the day before yesterday, may now be off the cards.
“Trump has positioned himself as an all-out trade warrior. That could dampen the spirit in emerging markets – just look at the Mexican peso – which have been recovering strongly for most of this year.
“Safe havens such as the Japanese yen and Swiss franc are likely to benefit during the immediate fallout – although the picture is much less clear for the US dollar and US treasuries, of course. A concerted ‘sell-America’ trade is a distinct possibility.”
But the pair believe that Brexit, and events in the weeks and months following the UK’s vote to leave the European Union, could prove useful in steering course through turbulent waters.
“We believe the Brexit playbook is useful here,” said Amato and Knutzen. “Market volatility may endure for a little longer, but as it does so, it could deliver buying opportunities.
“A Trump administration is likely to be better for the traditional energy sector than a Clinton Presidency, and less damaging to the healthcare and financial sectors. United government may also remove the partisan obstacles to meaningful infrastructure spending and corporate tax reform, particularly the issue of profit repatriation – although it is useful to remember that Trump is far from popular among many traditional Republicans.
“The biggest risk, of course, is Trump tries to turn some of the more populist rhetoric of his campaign into reality. Whoever had emerged victorious today, the forces that have led to the rise of the likes of Trump, Sanders, Farage in the UK, Le Pen in France, and Wilders in the Netherlands are not going away – and partisan shouting matches, assaults on free trade, an interventionist approach to unsustainable industries and a disregard for the financial robustness of the US are not viable solutions. The result could be a tug of war between the deflationary forces associated with lower economic activity and the inflationary forces from higher trade barriers.
“Globalisation, slow growth and demographic change mean that, for the developed world’s middle class, rightly or wrongly, it feels as though the pie is getting smaller. When we feel that the pie gets smaller, we fight over it ever more ferociously. Rancor simply makes it more difficult to pursue the policies that can grow the pie again – and the spiral continues.
