In the biggest American political upset of a lifetime, Donald Trump has been elected President of the United States. Just in case you hadn’t heard!
I confidently predicted that Hillary Clinton would win the election. I was wrong, as was almost every other election pundit. It’s a good example of why you should never bet the farm on a single trade, no matter how probable you think your predicted outcome is.
As the polls continued to show a Clinton victory was likely during the run-up to the actual vote itself, I did take a profitable long USD/JPY trade, which I wrote about in my daily signals. I closed the trade out just as the polls began to close in the U.S. in a classic “buy the rumor, sell the fact” operation.
The initial results looked quite good for Clinton, showing that she was exceeding Obama’s performance in the areas where Democrats did well. Unfortunately for Clinton, Trump did even better at getting his voters to turn out.
Despite lots of talk about record turnout, from the numbers I have sourced, total turnout looks as if it was only 55%, which is respectable by recent standards, but hardly record-breaking.
Leaving election analysis and politics aside, what did it all mean for the market? More or less what I was forecasting would happen in the event of a shock Trump victory:
“….we can expect the USD, AUD, and NZD to rally, and the JPY, Gold and probably also the Swiss Franc to fall. Global equities should also get a boost.
If the early returns from Florida look competitive for Trump, or if they are showing a stronger Trump vote than has been forecast by the polls, we can expect a more violent market reaction, but in the other direction.”
That is exactly what happened as the results started to make a Trump victory more likely than a Clinton win. The Trump-driven movements were especially strong in Gold and the JPY, not to mention the Mexican Peso, which is not available at many Forex brokers.
Interestingly, though, despite the sizeable swings, the U.S. Dollar and some other currencies are back to where they started. The changes that the Trump win seems to have produced which are persisting, are strength in Gold, Silver, and the Japanese Yen, plus weakness in the stock market and of course the Mexican Peso, which is especially hard hit being down by more than 10%.
This suggests that this is the direction in which the odds will probably lie over the near term.
Long: precious metals, Japanese Yen
Short: equities, Mexican Peso
Going back to the politics of the event, what is striking is the unprecedented degree of fear and loathing a very wide section of the electorate and the world at large have for the new President-elect. While that is not a new development in American politics, Trump’s willingness to cross certain red lines of discourse during the campaign have been reciprocated accordingly. A glance at the headlines of Clinton-supporting media will show you any number of Trump-is-fascist-how-will-I-tell-my-children pieces. Senior politicians and diplomats within some of American’s traditional allies are not pulling any punches in sharing very low opinions of Trump.
Trump’s party, the Republican Party, also has control of both Houses of Representatives, the American parliament. This suggests that Trump should have a relatively easy time pursuing a legislative agenda.