Will the rally continue
As we strap ourselves in and get ready for the rollercoaster ride that will be Donald Trump’s stint in office, we thought it was a good time to contemplate how events could play out in the years ahead. Studies has been done into the effects of populist governments – like Trump’s – and how their policies impact economic performance and the markets.
Initially, there is a sugar hit for markets and the economy – and indeed we are seeing this now with Trump. But after five or so years, populist policies lead to inefficiencies and wastes in the economy. The promises that brought the government to power are left unfulfilled and the people who supported them are left wanting.
- sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
Published on 01 Feb 17
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Venezuela tension heats up
Duration 03:16
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Aussie dollar surprises market
Duration 03:10
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Markets climb as investors watch US healt...
Duration 02:31
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As we strap ourselves in and get ready for the rollercoaster ride that will be Donald Trump’s stint in office, we thought it was a good time to contemplate how events could play out in the years ahead. Studies has been done into the effects of populist governments – like Trump’s – and how their policies impact economic performance and the markets.
Initially, there is a sugar hit for markets and the economy – and indeed we are seeing this now with Trump. But after five or so years, populist policies lead to inefficiencies and wastes in the economy. The promises that brought the government to power are left unfulfilled and the people who supported them are left wanting.Sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
-
Venezuela tension heats up
Duration 03:16
-
Aussie dollar surprises market
Duration 03:10
-
Markets climb as investors watch US healthcare bill
Duration 02:31
Initially, there is a sugar hit for markets and the economy – and indeed we are seeing this now with Trump. But after five or so years, populist policies lead to inefficiencies and wastes in the economy. The promises that brought the government to power are left unfulfilled and the people who supported them are left wanting.
Trump’s polices – especially his protectionist initiatives – will not be good for the US in the long run. The boost to economic growth that comes from his fiscal stimulus is likely to have faded by the end of his term, and monetary policy will likely be a lot tighter than it is now.
The fallout is an increased risk of recession in the US as we move into late 2019 and 2020. Given major corrections in stock markets often occur three to six months before the onset of an economic downturn, the next big downward move, up to 20% for the S&P 500 is perhaps sometime around September 2019.
So, the question for investors is do you wait on the sidelines and miss the sugar hit, planning to invest again when markets come off in 2019? Or do you jump in, ride the current equities wave? 2019 is a long way away and the market could be significantly higher even after a 20% correction.
But what about the fallout for the rest of the global economy? Looking broadly, we expect to see stronger global growth led by countries like China and India.
The strength of the US Dollar against the Japanese Yen and Euro will be a major theme for 2017. It will not only drive currency markets but also have an impact on equities, providing support for stocks in Japan and Europe.
The rise in the US Dollar also takes the pressure off China’s currency, which is good for markets.
Keep an eye on the US bond market, which will be linked to inflation expectations. If the US inflation rate rises too quickly, long bond rates could rally quickly towards 4% from the current rate of 2.5%. And this would be a significant hand break for all equity markets.