MARKETS are always full of surprises. In the run-up to the Presidential election, many investors were highly nervous about the possibility of a Trump victory. But on the night of the results, there was a dramatic turnaround. Within a few weeks, the market capitalisation of global equities had risen by $3 trillion and that of government bonds had fallen by the same amount. Markets were betting on “Trump lite” – that his tax cuts and infrastructure spending would be pushed through boosting growth and possibly inflation. By contrast, they downplayed the other “Donnie Darko” element of his policies – his threats to tear up trade agreements and heighten geopolitical risk in the middle east and Asia.
So far, however, we have seen more of Donnie Darko than Trump lite. First there was his “I have a nightmare” inauguration speech with its references to “American carnage” and protection. Then there were his early actions which focused on trade (abandoning the Pacific deal known as TPP and promising to…Continue reading