I have spent the last hour, or two, trying to figure out how to write about the apparent market reaction to a potential Trump versus Clinton result at the fast looming US elections. Given that most of my readers at the moment are from the US I was looking for something else to write about. If you are anything like me, you hear the words "US election" and suddenly find something else to talk about. It's not that I am not interested in politics, it is just that after a while my brain needs a little variety to be doing things with.
Here's what I have learnt though which may explain some media panic and the market reaction to a business person, Mr Trump, in The White House.
Firstly, I note that social media and media outlets in general, including powerful Australian publications, have taken to misquoting and misrepresenting Trump's views. When challenged on these views using legal language and asking for the article to be retracted, I note they have been.
My natural inclination is to support a candidate when they are unfairly attacked on social media because I want to know why such virulent attacks are necessary. If this has happened to Hillary Clinton I have not noticed it but would equally question any news outlet going out of their way to lie about what someone said regarding particularly sensitive issues.
While Reuters reports that Hillary Clinton would like to see more capital controls and reduced risk on financial markets (see article below, 1) most bankers are betting on her maintaining the current system. The fears of Trump as President seem to stem from his enthusiasm for increasing rates on mortgages and savings accounts. Increasing rates are good for savers and would encourage business investment. I find it curious that financial markets are reacting negatively to a successful business owner being part of financial regulation given that managing money is at the core of managing and keeping business interests.
The real fear, to my mind, and the markets that should react strongly, and negatively, to Trump as President are my country Australia. With much of our capital for residential borrowing coming from the US an increase in interest rates over there will lead to an increase in capital costs for banks and an increase in bank loan interest rates.
A one or two per cent increase would likely lead to further credit controls on mortgages here, and a plunge in housing prices. While this would be a negative for those currently in the housing market with no room to move, and housing investors who would likely see the highest interest rates rises, it is good for cash buyers and savers. An increase in interest rates, combined with tightening of more generous welfare payments in Australia, could lead to a recession. On persons loss can easily become another's opportunity. As I see it, our country is headed for a recession whoever is voted in to The White House.
This article is my view on current events only and should not be taken as professional advice.