The first speech by President elect Trump has had a calming effect on the markets. The FTSE 100 fell at the London open, but not by as much as the futures market was predicting, it is currently down by just over 1.6%. Trump definitely sounded more Presidential than he has done at any stage during the election campaign. In fact, one could argue that this outsider has delivered an establishment-style victory speech, which is soothing stressed markets.
Not a second Brexit
This suggests that a win for President Trump is not yet America’s Brexit moment. US Treasuries have reversed earlier gains, and yields are rising. The Mexican peso has also backed away from record lows vs. the USD. The yen is giving back early gains; gold has backed away intra day highs and is falling back towards $1,300.
Could the markets be hoping that 1, Trump won’t be as bad a president as they thought he would be less than 24 hours ago? 2, That he may actually be more establishment and less maverick than he portrayed himself throughout the campaign? At this stage we can’t answer these questions, but they give the markets lots to ponder today.
The market also appears to be warming to US stocks, Dow Jones and S&P 500 futures are eroding some of their earlier losses, and if European stocks continue to recover, could we see stock markets end the day in positive territory?
However, it may be too early to think that President Trump won’t have a negative impact on the markets or the economy. Perhaps it is because Trump has won a convincing victory, this seems to be softening his explosive rhetoric. However, it is worth remembering that Trump started a “movement”, now he has to turn that into a political machine capable of ruling. We won’t know if he can be successful until he actually takes office in January.
For now, this is a strange day, politically and financially. We have suffered a massive political shock, but the markets are wondering if President Trump is less of a threat to America’s economy in office, compared to what he was during the campaign.
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