Donald Trump’s win served as another parallel to the case of Britain leaving the European Union (also known as “Brexit”). After the announcement of Brexit, the Hang Seng Index dropped by 1,200 points, but rebounded by 600 points subsequently.
Similarly, when Donald Trump started to take a lead over Hillary Clinton yesterday, the Hang Seng Index at some point fell by 1,091 points from its high, but rebounded by 458 points before closing. Those who were bold enough to enter at the market’s low point would have made money.
Why Donald Trump Won
Why did the stock market crash when Trump became president? If the reason is that a Trump presidency means uncertainty, why did Americans still vote for a candidate who would bring about a stock market crash?
I think the reason is similar to why the majority of the Brits voted for Brexit—these people, just like the Americans who voted for Trump, do not hold any stocks! These people are at the bottom of the society, and many are from communities with a white majority, so naturally, they don’t want “outsiders” to take their jobs and have a share of their social welfare.
A few months ago, when the results of the British Referendum were announced, I was one of the only few in Hong Kong who viewed it in a positive light. This time round, I am also positive about a Trump presidency.
The Trump presidency might negatively impact the US financial markets in the short term, but should this happen, it will also reduce the chances of a December Federal Reserve interest rate hike, and the market should benefit as a result.
Policies that Trump Might Implement
Trump actually adopted a milder tone after being elected. At least, he did not talk about imposing taxes on Chinese goods, forcing the Chinese yuan to appreciate, or arresting illegal immigrants in his post-election victory speech.
What we must understand, is that each and every presidential candidate, upon being elected, will “forget” what they have talked about previously. I think from this point, Trump is moving towards the direction of implementing tax cut and aggressive infrastructure development in order to stimulate the economy.
The infrastructure developments will also create a demand for infrastructure materials across the globe, as well as help China to clear inventory. This is good for infrastructure materials stocks.
Besides, Trump is probably not very interested in Obama’s plans of surrounding China. The South China Sea disputes will probably become milder, and this will benefit the stock market.
The only concern is that Japan might manufacture nuclear weapons for self-protection (if Donald Trump decides that the USA will not defend Japan for free anymore).