Everyone around the world is watching what was unthinkable this time last year, actually become a reality today.
So far, the reaction on the markets has been fairly muted and you would have thought investors are in wait-and see mode, and waiting for clarity on how the new President will be able to implement his campaign promises before deciding on their next strategic positions. There is no disputing that Trump’s fiscal stimulus plans should have a positive impact on the U.S. economy and this is why major equity markets are still at elevated levels, but the question is whether Trump can actually pass these plans through Congress? If not, then this is a severe risk to profit-taking with the markets completely overbought if these policies do not become a reality.
If it is going to take some time for Trump to unveil how he will be able to implement his campaign promises, there is also a risk of investors taking profit, especially when you consider how impatient investors can become when it comes to buying on announcements without tangible evidence of something taking place.
When it comes to Trump’s opening statement as the new President of the United States, the comment “we will always put America first” presents a risk by possibly causing some further pressure on the emerging market currencies because these export denominated economies are seen as being vulnerable to losing jobs when it comes to protectionist trade policies. Therefore I will be keeping an eye towards how the Asian markets open on Monday morning, specifically currencies like the Malaysian Ringgit and Chinese Yuan that have been particularly volatile and sensitive since the U.S. election outcome.