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by GK Strategy 10th November, 2016
3 min read

Election Results Trumps Expectations

Donald Trump has been elected as the President of the United States, leaving much of America and the rest of the world in a state of shock. Predictions from investors around the globe were slowly torn to shreds through the night as the seemingly impossible became a reality.

How have the markets taken it so far? Initially, not well. The Asian markets set the trend, with Japan’s Nikkei 225 index falling by 5.4%, the Hang Seng in Hong Kong trading 2% lower and the Shanghai Composite losing 0.6%. The FTSE 100 was also down, along with other European stock markets such as France’s Cac index and Germany’s Dax. Although some of these have bounced back since this morning, the unexpected result is a major shock for the markets to handle, and there is potential for longer-term uncertainty. For many investors, and millions of people watching, there is sensation akin to that felt on the morning of 24th June. As with Brexit, there is a sense of bewilderment for many onlookers, and for some a deep sense of foreboding. Given Trump’s rhetoric around trade agreements with various countries, including China and Mexico, the world will be waiting to see what he says in his new role, now that he has the opportunity to act on the many pledges he made during the campaign.

In the meantime, the UK has been quick to stress that its historic diplomatic relationship with America will not be compromised by this result. Theresa May has today been leading the congratulations for the new American leader. She reaffirmed the ‘enduring and special relationship’ that exists between the two countries, asserting that they would remain close partners on trade, security and defence. Given Trump’s suggestion that a trade agreement with the UK following Brexit will be prioritised by him (a very different stance to that of Obama), it could be that the UK is set to benefit at least in this respect, although we don’t yet know how he will approach diplomatic issues or what his own view is of the special relationship.

For the time being, all eyes will be on the stock markets and currencies and what the immediate impact is on these, but in the longer term there is a question over what American economic policy will look like under Trump. Investors, among others, will be hoping that Trump’s tendency to make snap decisions shrouded in populism will not prove to define his time in power. His victory speech certainly surprised some with its soothing and somewhat more diplomatic than usual tone – indeed some markets, particularly in Europe, showed signs of being reassured following his first words to the public as President Elect. The world awaits with bated breath, however, to ascertain which Trump will be leading the free world; will he be a more moderate President than the image carved out for him by his campaign, or will he indeed go on to take America into a new, isolationist era.

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