Emerging market currencies posted losses following the unforeseen election result, but remained stronger than expected with the Mexican Peso, accompanied by a dive in Heineken shares, showing most of the desperation with a 15% dip against the already depreciated US Dollar. Safe haven currencies – the Swiss Franc and Japanese Yen outperformed the Dollar with a 2.88% and 4.05% dive upon the announcement. Gold added 5.5% during the turmoil. Unlike other emerging market currencies, the Russian Ruble showed no signs of weakness, which might be well explained by the potential benefits Mr Trump could bring on the table with his alleged interest in creating closer ties with Vladimir Putin. Mining and metal stocks posted gains on a promise to rekindle growth in the US manufacturing sector, and a similar trend appeared in defence company prices amid an expectation of higher country spending to ensure they are capable to ensure their own safety.
US T-Bond Price
© Bloomberg
Markets calmed sooner than expected, ranking a Trump presidency lower than Brexit on the scale of global financial threats. Gold fell back in place and the Dollar even posted gains. Kathleen Brooks, the Research Director of City Index, suggests it might be the case where markets see Donald Trump as a lesser threat in the White house than on the campaign trail. The rally of drug company stocks caused by prevented threats of the Clinton-proposed cut in drug prices is also likely to be short-lived, notes Andrew Baum, an analyst from Citi.
However, experts remain positive that uncertainty in markets will extend for a few weeks at least. In contrast, hedge funds – being generally indifferent between the two presidencies – took the election to their benefit, noting it as the end of a period of high uncertainty. Managers now hold power to take positions based on the political scenario, which proved troublesome when facing the unknown.
Oil output is also discussed to stay under the radar when Trump begins putting his words to action. Even though the billionaire has implied on softer fracking and fossil fuels regulations in general, federal lads hold a small share of the global oil output, meaning that federal drilling could leave a small mark on oil prices. A strong disbelief in man-made climate change is, however, likely to result in higher demand for oil in the United States of America, due to lack of regulation on emissions.
European dealmakers, however, express optimism on M&A and investment activity in the region, seeing the Republican candidate's victory as a deal breaker for companies targeting the US for transactions, and suggesting they might now favour the EU and UK instead. This would not be the first instance when groups from Asia and the Middle-East would withdraw from a market that could eventually prejudice their position as an investor, claims Neil Passmore, CEO of Hannam & Partners, an investment bank based in the UK. Going even further, UK experts speculate on a surge in commercial property prices that have been depressed following the vote in favour of Brexit and uncertainty stemming from deal talks with the EU.
What makes investors even more wary about the future, is the potential for a US credit rating downgrade caused by the budget deficit expansion amid increased infrastructure spending. With future policies still remaining somewhat uncertain, time is yet to tell what the markets will bring in the post-election period.