Donald Trump’s surprise election win triggered a meteoric rise in global equities, as investors rallied behind expectations of faster economic growth. Since election day, U.S. equity markets have added a staggering $3 trillion in value, with the Dow Jones Industrial Average reaching 21,000 for the first time ever. So far, Mr. Trump has been Wall Street’s chief motivator. But how long will this last?
Volatility, as measured by the CBOE VIX, has been virtually non-existent over the past four months. This suggests traders might be comfortable with the direction of the market and see no reason for a knee-jerk selloff anytime soon. But as the weeks and months roll on, traders will probably start demanding evidence of faster growth under the new administration. But as Mr. Trump’s Treasury Secretary has already noted, it’ll be a while before market participants can expect big changes.
Treasury Secretary Steven Mnuchin told FOX Business Network last month that the new administration’s policies won’t have much impact on the economy this year. This suggests we may have gotten a little ahead of ourselves with the latest rally. Some of the pessimists feel that the stock markets are extremely overbought and could be due for a major correction in the near future.
Although economic growth might be months or even years away, Trump has made an immediate impact on U.S. politics. The president has already withdrawn the United States from the Trans-Pacific Partnership (TPP), vowed to renegotiate the North American Free Trade Agreement (NAFTA) and issued a travel ban on seven Muslim-majority countries that was later revised to six. He has also voiced displeasure about China’s trade dominance, but stopped short of calling it a currency manipulator (something he vowed to do while campaigning for president).
Looking further into the future, inflated promises of economic growth may be the least of our worries. Trump won the White House on a platform of anti-establishment politics. As he brings that same approach to the international arena, the prospect of geopolitical fireworks becomes all the more likely. The president has already gone against the grain on key issues, such as globalization, free trade and immigration. America’s shift to a more isolationist agenda won’t be without its adverse effects for markets that have grown accustomed to the globalization narrative.
We also shouldn’t forget to mention Mr. Trump’s Twitter wars, which have been known to move the financial markets. Who knew that 140 characters or less could have such a major impact on investor sentiment?
The next four years might bring about tremendous change in the global political order. Trump’s election win and the Brexit vote before it clearly show that nationalism and protectionism are on the rise across much of the Western world. As this shift continues, traders can expect the possibility of more volatile conditions to govern.
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 Tim Mullaney (March 2, 2017). “The market’s rally started without Trump, and could continue without him.” CNBC
 Bryan Rich (February 23, 2017). “Mnuchin Says Growth Impact Won’t Come Until 2018.” Forbes.