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Have investors become too optimistic about the impact of a Trump presidency?

Posted by Paul Jourdan on 19/Jan/2017

There is a lot of misguided commentary about both the Brexit Bounce and the Trump Bump (or as it may be known in future the Trumpski Bumpski).  People assume that because the market at first fell and then rose following these events, investors believe that the doomsayers were wrong and both outcomes are perfectly fine.  This analysis is wrong-headed.  The truth is that UK stock market would be a lot higher (in US dollar terms) if neither Brexit nor Trump had happened.  The markets rose in 2016 because the finely wrought multi-year recovery plan from the 2009 crisis, of which low interest rates were a key part, has been broadly working.    But investors delayed buy decisions until after the feared polling events, and once they were out of the way the weight of money was always likely to drive markets higher.  The market’s verdict on Trump will come several years later, and on current showing we should expect this to be dire.  But before you sell any shares consider the odds that Trump doesn’t remain in office through his first 100 days, for the Emperor Has No Clothes.