How worrying is the global market reaction to the American election?

Sep 2013
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On a hill
Nov 14th 2016, 17:38 BY R.A. | WASHINGTON

IT HAS not yet been a week since Americans elected Donald Trump their next president, and already there is a lot to digest. While Mr Trump's initial personnel decisions deserve plenty of scrutiny, the global market reaction to the election also demands attention.

This morning, the decline in bond prices that began last week continued. In America, the 10-year government bond yield rose above 2.26%, the highest level since the end of 2015, while the 30-year bond yield reached 3%. Treasuries are faring no worse than many other bonds, however. Yields are going up nearly everywhere, but emerging markets and the euro-area periphery are experiencing especially large moves. (It is, as my colleague Buttonwood quipped on Twitter, a "Trump tantrum".) What is happening here, and why?

The conventional wisdom is that markets are pricing in an expected move toward expansionary policy in America. Mr Trump is expected to cut taxes dramatically, increasing the American budget deficit, while also spending more on infrastructure and defence. That boost is coming at a time when America's economy, while still operating short of potential, is nonetheless humming along as close to capacity as it has been in a decade. Unsurprisingly, inflation expectations are rising.

snip

While Mr Trump's plans might deliver an inflationary impulse, there is another force at work, the effects of which could swamp any American fiscal stimulus. The Federal Reserve, while it remains independent, is not going to tolerate a big rise in inflation.

http://www.economist.com/blogs/freeexchange/2016/11/trump-shock
 
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Jan 2016
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Colorado
The markets have soared, setting many new alltime highs since the election.
No doubt. You Republicans have become SHAMELESS KEYNESIANS, and are planning on a HUGE fiscal stimulus, and that at a time when the American economy is already operating close to full employment.

The market LOVES that kind of talk.

In the short run.

The corporations who have seen their stock prices rise the most are precisely the corporations that would stand to benefit from such a massive fiscal expansion.

We will get a 'nice' mini-boomlet out of the Trumpian policies. Might last for a couple of years. Might raise the Dow to 22,000.

And then will come the CRASH.

It will be much WORSE than the crash of 2008.

We are back to boom-and-bust economics. We will have a bubble, and the bubble will then burst, as ALL economic bubbles ultimately do.

Brace yourself. But yes, take advantage of the opportunities in the stock market for the next year or two. Build up your nest egg as fast as you can. You're going to need it.
 
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Mar 2012
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New Hampshire
No doubt. You Republicans have become SHAMELESS KEYNESIANS, and are planning on a HUGE fiscal stimulus, and that at a time when the American economy is already operating close to full employment.

The market LOVES that kind of talk.

In the short run.

The corporations who have seen their stock prices rise the most are precisely the corporations that would stand to benefit from such a massive fiscal expansion.

We will get a 'nice' mini-boomlet out of the Trumpian policies. Might last for a couple of years. Might raise the Dow to 22,000.

And then will come the CRASH.

It will be much WORSE than the crash of 2008.

We are back to boom-and-bust economics. We will have a bubble, and the bubble will then burst, as ALL economic bubbles ultimately do.

Brace yourself. But yes, take advantage of the opportunities in the stock market for the next year or two. Build up your nest egg as fast as you can. You're going to need it.

I also am noticing that Trump is implementing Reagans' "smoke and mirrors" strategy in regards to the economy. A sort of "if you believe it, it will happen" thing. He comes out at least weekly now and loudly boasts some company is retaining American workers or is hiring or is staying here and makes this big huge deal out of it. People see it and think "huh, wow" without reading the details. A great deal of the 80s was done this way and it worked well for a short time. We had the era of money and greed and the infamous Yuppie. People were happy or so they thought. Problem is at some point down the road, it breaks down. Trump is using this to his advantage.
 
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Feb 2011
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Boise, ID
Nov 14th 2016, 17:38 BY R.A. | WASHINGTON

IT HAS not yet been a week since Americans elected Donald Trump their next president, and already there is a lot to digest. While Mr Trump's initial personnel decisions deserve plenty of scrutiny, the global market reaction to the election also demands attention.
Weren't you the one that started the thread on election night sounding the alarm bell about Dow futures?

I'm not financial markets expert but I think it's relatively safe to think stocks could be overpriced currently.

More later on your link though.
 
Jan 2016
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Colorado
Weren't you the one that started the thread on election night sounding the alarm bell about Dow futures?
Even before the markets opened the next morning, investors were already re-thinking their initial reaction, as it dawned on them that Mr. Trump was really promising a MASSIVE fiscal stimulus to the American economy. At SOME point, they will start thinking about the LONG-TERM consequences of that......
 
Jul 2014
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11,567
midwest
Weren't you the one that started the thread on election night sounding the alarm bell about Dow futures?

I'm not financial markets expert but I think it's relatively safe to think stocks could be overpriced currently.

More later on your link though.
Yes, and it was titled DOW DOWN 840 POINTS.

Which was incorrect.

The Dow went up, WAY UP.

It never went down 840 points, those were the FUTURES which were down for a time.

At least one member did not understand the difference between FUTURES and actual trading.
 

Djinn

Council Hall
Dec 2007
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Pennsylvania, USA
The markets have soared, setting many new alltime highs since the election.
You'll see this after every presidential election. Prior to the election, there is uncertainty. Uncertainty depresses stock values. Once the next president is determined, stocks go up, because analysts can predict stock values with greater accuracy.
 
Jul 2014
41,795
11,567
midwest
You'll see this after every presidential election.Prior to the election, there is uncertainty. Uncertainty depresses stock values. Once the next president is determined, stocks go up, because analysts can predict stock values with greater accuracy.
I am not sure you are correct about that.

You may be, I just don't know.

You mean going forward, or in the past?