Markets had a few days to digest Trump’s surprise victory on November 8th. Many experts said that the markets would react negatively to Trump’s presidency. Conventional wisdom in Wall Street held the view that the best possible outcome for the markets would be a Clinton presidency coupled with a Republican controlled congress. It turns out that a Trump presidency has actually yielded many more winners in the stock exchange, allaying fears that markets would crash. The Dow Jones soared to record highs after the election results came in, and although there are some losers, the picture is much better than what the experts thought.
Those who won with Trump
Car maker stocks soared, together with defense and coal stocks. This reflects Trump’s promises to repeal climate change regulation, as well as promises to bolster the military. Trump is widely expected to do away with efficiency requirements for engines that make car and truck production more expensive. He is also expected to give incentives to the ailing coal industry, which was almost destroyed completely by Obama’s policies.
Those who lost with Clinton
Losers, as expected, include those companies that depend on environmental regulations and probably some in the healthcare industry. In the meantime it is clear that many tech companies have taken a hit. The reasons for that dip in the NASDAQ, might be related to fears about the future of skilled immigration – which Silicon Valley relies on – and the future of international commerce – on which tech giants such as Amazon rely.
In the meantime, countries that depend deeply on commerce with the US have been hit. Some of those foreign markets are in disarray. Mexico in particular saw its currency slide to record lows. Canada has also seen losses, and although the Toronto Stock Exchange – TSX – did not react negatively to the news, there are fears it will. The main reason for this is due to Trump’s pledge to repeal or renegotiate NAFTA. Canada has a bilateral trade treaty with the US to fall back on if the US withdraws from NAFTA, but Mexico has no such provisions.
Canada might also fare better during Trump’s presidency than Mexico. The resident elect has pledged to allow the construction of the Keystone XL pipeline. This could be a huge boon for the Canadian economy, especially for Alberta which was hit hard by the decline of oil prices. This can also help Trudeau deliver on some of his promises, which paradoxically is essentially what he needs to keep his Liberal party in power and keep advancing towards his goals.
Is the Future Bleak?
So far, none of the doom and gloom scenarios that the experts put forth, has materialized. President elect Trump has not been a disaster for markets. Quite on the contrary, it seems investors have already learned how to live with his brash style. The NYSE is thriving in the aftermath of the surprise Clinton upset, and international markets will adapt mainly because it is unlikely that Trump will actually deliver on all of his anti-globalization promises. It turns out that just like election pollsters and political pundits, investment analysts were wrong about this one.