A post-election look at the markets: How will it affect me?

Here, we look at the markets' response to Trump ascent to the presidency and what it means for you.

Donald Trump’s ascent to the presidency may have come a shock to many of us, but the markets have reacted warmly to the prospect. On Monday, the Dow Jones Industrial Index inched towards its third consecutive record close. This was due to gains in bank shares offsetting declines in technology stocks.

Where are the markets seeing profits?

Although there’s great amounts of uncertainty over Trump socially, many businesses are buoyant by the news of a Trump presidency because of his strong business background, with many believing that he will take a business-led approach to the Oval Office.

Strong growth is now expected by many, as is high inflation. This has caused financial stocks to move higher, alongside government-bond yields.

Bank of America stocks rose a whopping $1.06, to $20.08, that’s a 5.6% increase and the stock’s highest position since November 2008.

Immediately following the election, US stock trading volumes were also particularly high. In the four sessions, immediately after the announcement of the result, they were well above the average for 2016.

If interest rates do rise as many expect them to, then lenders’ profits will be boosted as the gap will be widened between what banks pay on deposits and what they charge on loans. A central theme of Mr Trump’s speeches during the presidential campaign was a pledge to ease regulation, which should further improve the performance of bank stocks.

From the way that the markets have reacted to the Trump presidency, it appears safe to assume that investors have specific predictions for the four years of a Trump presidency: high growth, high spending and high inflation.

How will this affect my investments?

This is excellent news if you trade in the equity markets. However, although this is positive news for equity traders, change will not be instant, so painful measures could come into force first.
Plus, there’s also the added issue that, until he takes office in January, nobody knows exactly what a Trump presidency will look like, so investors should be cautious. There’s nothing stopping him from not enacting the policies he has previously pledged, and some of them may not be particularly useful when they come into effect.

As a result, caution is currently advised for anyone with investments. Check and monitor your trading tools closely. Although the upsides of a Trump presidency look to be clear, they’re still months away, and we could see considerable negatives in the short term, so invest with care.

Ben Lobel

Ben Lobel

Ben Lobel was the editor of SmallBusiness.co.uk and GrowthBusiness.co.uk from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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