The financial world’s winners and losers – so far – of the Trump era

Whats On In Monaco

For global markets, Donald Trump’s U.S. election victory was a big deal. Few investors expected it – so asset prices have probably moved a lot more than they would have had Hillary Clinton became the American president.

And of course there are winners – and losers.

Stock markets overall have barely moved. The MSCI All Country World Index, which reflects global stock markets, is up just 0.3 percent. The Shanghai Composite is up 2 percent and the S&P 500 has gained 3 percent since the election. The Russian stock market is up nearly 5 percent.

As a whole, Asia has suffered, with the MSCI Asia ex Japan index down 5 percent. Within Asia, the biggest decliners were India and the Philippines, both down 9 percent. The Singapore stock market is down 2 percent. (For the sake of consistency, we show stock market returns in U.S. dollar terms.)

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What happened? As Bloomberg explained on Monday, “Global funds sold about $11 billion of equities and bonds in Asia’s emerging markets after Donald Trump’s victory in the U.S. presidential election as expectations for his economic policies sent Treasury yields higher and sparked the dollar’s strongest rally in eight years.”

What this means is that investors are expecting a Trump government to do a lot more deficit spending (that is, borrow more to spend on things like infrastructure). This will increase demand for the dollar – and may push up inflation.

Meanwhile, and partly because of this, markets are expecting the U.S. central bank to raise interest rates in December, for the first time since last December.

These factors have contributed to a stronger dollar – and lower bond prices (as a bond’s yield rises, its price falls). As shown in the graph above, global bond prices are down 4 percent – which, in the world of bonds, is an enormous move.

Also, sectoral performance says a lot about the expectations of a Trump government. As we anticipated, banks’ and brokerages’ share prices are up strongly… the S&P 500 financials index has risen 11 percent, while a global financial stock index has jumped almost 5 percent.

But the shares of utility companies (which are very dependent on interest rates… higher interest rates make these stocks less attractive) are down 6 percent.

Meanwhile, commodity prices have risen, as reflected in the 4 percent increase in the S&P GSCI Index, which shows the performance of major investable commodities. Usually, when the U.S. dollar rises in value, commodity prices fall. (This is because commodities are priced in U.S. dollars – so for everywhere in the world but the U.S., a stronger dollar means that commodities are more expensive in local terms.)

However, in part because a Trump government is expected to be hungry for commodities, overall commodity prices have risen. (The price of oil is up 7 percent; yesterday we forecasted that oil and natural gas will be among the winners of a Trump government.) Gold and silver are down sharply, though.

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And behind a lot of these movements is the U.S. dollar, which has appreciated 4 percent since Donald Trump was elected. The Singapore dollar has fallen 3 percent against the U.S. dollar, and Malaysia’s ringgit has fallen 5 percent.  And the Mexican peso – Mexico was a favourite target of Trump during the election campaign and may be a big loser if he makes good on some of his campaign promises – is down 10 percent versus the greenback.

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Of course, today’s winners – it’s been all of two weeks since the election results – may not be tomorrow’s winners. But so far, the U.S. dollar, banks and oil are all happy about the Trump election victory. And Asia is hurting… see our report here on why Asia stands to be a big loser in the world of a Trump government.

(You can read about what sectors of the American economy might benefit from a Trump presidency, looking beyond the first two weeks, here.)

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Kim Iskyan

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