Tuesday, 8 November 2016

Trump victory: Be prepared for a bloodbath in the stock markets tomorrow!

Be prepared for a bloodbath in the stock markets tomorrow.


I was actually discussing with a friend as to whether we should buy some counters in the stock market prior to the election results - because a Clinton win would probably lead to a (slight) increase, whereas a Trump victory would send global stock markets plummeting.

Well, at this point (Trump:Clinton is 264:215 at time of publishing), it is safe to say that we'll most likely be seeing a Trump presidency. As it is, here's what markets have already done:

  • S&P 500 Index futures slide as much as 5 percent
  • FTSE 100 Index futures drop 3.4 percent
  • MSCI Asia Pacific Index drops 2.6 percent
  • Mexican peso tumbles as much as 12 percent, breaching 20 per dollar for first time
  • Japanese yen climbs versus all major currencies
  • Euro, Swiss franc rise at least 1.7 percent
  • Gold jumps 3.1 percent, most since Brexit
  • Crude oil slides 2.5 percent
  • 10-year U.S. Treasury yield drops five basis points to 1.80 percent
With Trump always going back and forth about what he says, it is hard to predict what kind of policies he will enact upon his entry to the White House.

Some of my initial thoughts for how Singapore will be impacted:

  • With TPP cancelled, Singapore's economy will suffer (thus stocks too)
  • Our REITs will also suffer, as Trump's isolationist policies will affect trade-reliant countries like Australia. Many of our REITs are moving into Australia for growth, and this will most likely be hampered.
  • Defence spending might potentially be increased, so security companies will then benefit (don't ask me which!)

Uncertainty almost always causes turmoil in the stock markets. While some choose this time to go in, I'm a little more reluctant to go for tried-and-tested methods, because by a Trump victory alone already shows that sometimes what you believe won't happen, might actually become reality.

And if he does win, the markets may slide before going up again (I won't be surprised if Trump's policies and stance favours businesses, which will then lead to greater growth) and it'll probably rally to new highs. Who knows?

Update: Trump has now won, but the stock market "crash" (if any at all) was short-lived. Markets have rallied back, and certain industries that are being favoured by Trump's statements (defence, etc) are seeing their stock prices shoot up while others (like those providing clean energy) are dropping. With the uncertainty, the markets may not be as battered as we thought they would be, but I believe the next few months up till February 2017 will have much for us to watch.


Gold might be our best insurance at this point in time?

15 comments:

  1. Don't think you know what the word "implicated" means....you may want to check on dictionary.com. As always, I'm amazed you are a GP tutor ����

    ReplyDelete
    Replies
    1. Ah, thanks for correcting my mistake! I didn't check my draft as I rushed this out during lunchtime. As always, I remain amazed that each time you choose to (help) correct a language error, you choose to make it a personal attack on my GP teaching skills, a side job which I take up to help prepare for the increased financial stress of taking care of 2 sets of ageing parents. Language alone doesn't give students an A, by the way. But never mind, you're entitled to your own doubt of my GP capabilities, as I'll let my students track record speak for itself :)

      Delete
    2. ... doubt *about my GP capabilities...

      Delete
  2. Xiao Mei

    Your analysis too over a bit.
    This is not just economic issue but also politics.

    ReplyDelete
    Replies
    1. Too young and experience play a part.
      Well Obama and Hilary may not be a good choice for US.

      Think deep. Looks the 8th years of what Obama did for US.
      And you know why the election results.

      Changes may not be a bad choice for US and UK.

      Delete
    2. Ah, I shall not claim to understand politics. Will leave that to the experts!

      Delete
  3. Market is unpredictable. Hindsight wisdom is better.

    ReplyDelete
    Replies
    1. Agreed! I'm wondering if Brexit had anything to do with it, because those who were gauging the market response by then might have tapped on this, and that might have explained the short-lived drop / fast-recovering rally? Who knows. I'll just focus on looking out for good companies at good prices :)

      Delete
  4. "Be prepared for a bloodbath in the stock markets tomorrow.".. Well? Where is it? I am waiting...

    ReplyDelete
  5. Markets are indeed unpredictable.

    The bloodbath, if any at all, was short-lived. There were some stocks that plummeted yesterday and have soared back today afternoon, good to those who have bought it! Shall not mention names here :)

    ReplyDelete
  6. Hi BB,

    Thanks for the article.

    My humble thoughts. Like most times in life, we were often too focus by what everyone is focusing on, where we neglect the more important focus. In my humble opinion, I think whether Trump or Clinton wins should not be the primarily focus, the focus should really be the state of economy US or Singapore or the world is heading to, rather than who is leading US.

    Many think who leads US is important. I tend not to focus on that. Neither Trump nor Clinton will make much difference at the root, other than the short term aesthetic effects on the surface.

    ReplyDelete
    Replies
    1. I thought the macro environment could perhaps help us in the stock markets. Guess I was wrong! Doing a follow up post on this soon, boy have I really learnt that markets really are seriously unpredictable.

      Delete
    2. LOL. Why banks cheong arh? Why no more worry over their exposure to O&G debts?

      Delete
    3. My wild guess is Trump, because US banks also chionged! haha the stock market really so unpredictable omg.

      Delete
  7. You might qualify for a new government solar energy rebate program.
    Find out if you are eligble now!

    ReplyDelete