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What Happens to the Markets if Donald Trump Wins?
CNBC
by Andrew Ross Sorkin
11/1/2016
The New York Times
Excerpt:
Assume, for a moment, that Donald J. Trump wins the presidency.
Some readers of this column will shudder at the thought and might even stop reading now. Others in the business world will beam, like Peter Thiel, the Silicon Valley entrepreneur.
But what exactly happens the day after? To markets? To the economy?
The conventional wisdom is that, right off the bat, the stock market would fall precipitously. Simon Johnson, the Massachusetts Institute of Technology economist, posited that Mr. Trump's presidency would "likely cause the stock market to crash and plunge the world into recession." He predicted that Mr. Trump's "anti-trade policies would cause a sharp slowdown, much like the British are experiencing" after their vote to exit the European Union.
In explaining his prediction, Professor Johnson wrote that Europe's economy is so fragile that "Trump's trade-led recession would tip Europe back into full-blown recession, which would likely precipitate a serious banking crisis." After that, he continued: "If this risk were not contained — and the probability of a European banking debacle is already disconcertingly high — there would be a further negative spiral. Either way, the effects on emerging markets and all lower-income countries would be dramatic."
Professor Johnson's view may be a bit hyperbolic, but to one degree or another, his pessimism is shared by many economists across Wall Street, from Citigroup to Goldman Sachs. Each cites a different set of reasons the markets will fall if Mr. Trump wins.
But is the conventional wisdom right?
Naturally enough, investors and analysts hate uncertainty. Hillary Clinton largely represents the status quo. Mr. Trump is more like Forrest Gump's "box of chocolates," as Peter Boockvar, chief market analyst at The Lindsey Group, an economic advisory firm in Washington, put it. "You never know what you're going to get."
In all likelihood, a Trump victory would lead to a swift, knee-jerk sell-off. Many investors will choose to sell stocks and ask questions later.
But in the days and weeks after a Trump victory, among investors who cull their portfolios carefully, the decision about buying and selling will be company by company, industry by industry, currency by currency and so forth.
In truth, it's impossible to predict how the markets would settle into a Trump presidency, despite the speculation on all sides. In all likelihood, it will take time for investors to truly make sense and "math out" how his policies would affect the economy. Yes, the Mexican peso would most likely fall on fears of a trade fight — Goldman Sachs says it could fall by as much as 25 percent — and shares of some insurance companies could tumble on the uncertainty of what would happen if Obamacare were repealed.
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View the complete article at:
http://www.cnbc.com/2016/11/01/what-...rump-wins.html
CNBC
by Andrew Ross Sorkin
11/1/2016
The New York Times
Excerpt:
Assume, for a moment, that Donald J. Trump wins the presidency.
Some readers of this column will shudder at the thought and might even stop reading now. Others in the business world will beam, like Peter Thiel, the Silicon Valley entrepreneur.
But what exactly happens the day after? To markets? To the economy?
The conventional wisdom is that, right off the bat, the stock market would fall precipitously. Simon Johnson, the Massachusetts Institute of Technology economist, posited that Mr. Trump's presidency would "likely cause the stock market to crash and plunge the world into recession." He predicted that Mr. Trump's "anti-trade policies would cause a sharp slowdown, much like the British are experiencing" after their vote to exit the European Union.
In explaining his prediction, Professor Johnson wrote that Europe's economy is so fragile that "Trump's trade-led recession would tip Europe back into full-blown recession, which would likely precipitate a serious banking crisis." After that, he continued: "If this risk were not contained — and the probability of a European banking debacle is already disconcertingly high — there would be a further negative spiral. Either way, the effects on emerging markets and all lower-income countries would be dramatic."
Professor Johnson's view may be a bit hyperbolic, but to one degree or another, his pessimism is shared by many economists across Wall Street, from Citigroup to Goldman Sachs. Each cites a different set of reasons the markets will fall if Mr. Trump wins.
But is the conventional wisdom right?
Naturally enough, investors and analysts hate uncertainty. Hillary Clinton largely represents the status quo. Mr. Trump is more like Forrest Gump's "box of chocolates," as Peter Boockvar, chief market analyst at The Lindsey Group, an economic advisory firm in Washington, put it. "You never know what you're going to get."
In all likelihood, a Trump victory would lead to a swift, knee-jerk sell-off. Many investors will choose to sell stocks and ask questions later.
But in the days and weeks after a Trump victory, among investors who cull their portfolios carefully, the decision about buying and selling will be company by company, industry by industry, currency by currency and so forth.
In truth, it's impossible to predict how the markets would settle into a Trump presidency, despite the speculation on all sides. In all likelihood, it will take time for investors to truly make sense and "math out" how his policies would affect the economy. Yes, the Mexican peso would most likely fall on fears of a trade fight — Goldman Sachs says it could fall by as much as 25 percent — and shares of some insurance companies could tumble on the uncertainty of what would happen if Obamacare were repealed.
.................................................. ..........
View the complete article at:
http://www.cnbc.com/2016/11/01/what-...rump-wins.html