Programs of candidates in presidents of the United States differ not only in political but also in economic aspect. Despite the rate of most experts to win Hillary Clinton, analysts do not exclude the possibility of Donald trump to be the White house and to calculate the possible options risk and profitable investments in different markets.
One of the most controversial presidential election in modern U.S. history coming to a climax: today, 8 November, America will make their choice and announce the name of the 45th President — Donald trump or Hillary Clinton. The intrigue remained until the last, so analysts are preparing various options for market reaction to the victory of one candidate or another. The victory for Clinton and Democrats, but there is a chance and trump.
Economic programs of the candidates are very different, but both plan to increase government spending and cut taxes, which will affect the stock market. Below is a brief overview of the possible scenarios, the analysts surveyed by Bloomberg.
The stock market
Victory For Clinton:
“The market is already laid for a victory for Clinton, so in this case, any rise will be relatively small,” says Margaret young, analyst at CMC Markets in Singapore. According to the rating of Barclays, in this scenario, the S&P 500 index could rise by 3%. Worse of all will feel the financial companies such as Goldman Sachs and JP Morgan Chase, and drug manufacturers. The report, prepared by analysts of BlackRock, shows that this year, stocks of biotech corporations, Novo Nordisk and Roche Holding grew only when falling political ratings of Hillary Clinton (and worsened her chances of winning). At the same time, Clinton’s plans to reduce dependence on oil and gas has led to an increase in the cost of companies involved in alternative energy, such as Sunrun, NextEra Energy and First Solar. Analysts at Evercore add to this list and more famous company Exelon, General Electric, Tesla Motors, SolarCity.
Victory Trump:
“Paper U.S. Treasury are estimated highly enough, but in case of victory trump expect massive sales. Many believe this is a classic “black Swan”, so the market reaction will be even more acute than for a referendum on British exit from the European Union, when the S&P 500 index during the two days lost 5.3%. Investors will seek the safe haven and, most likely, will begin to invest in the yen, which has a negative impact on Japanese exporters,” explains Margaret young.
Barclays predicts a drop in the S&P 500 by 11-13% in the winning trump.
While the changing position of the Republican party complicates the assessment of long-term effect of this event on a specific sector. Analysis of the fluctuations of the stock depending on the rating of a particular candidate suggests that while trump is the President feel good are banks, insurance companies and manufacturers of medicines and medical devices.
Good prospects open and in front of companies that are engaged in the construction and development of infrastructure, such as Caterpillar and Ingersoll: plans trump spending on the sector is much bigger than Clinton. The same applies to the defence sector, according to a report by Credit Suisse. The reluctance of Republicans to invest in the development of renewable energy, and regulatory simplification will strengthen the position of companies in coal mining, in particular, NRG Energy, says Morgan Stanley.
Debt market
Victory For Clinton:
According to Bank of America, the victory of the candidate from the Democrats will lead to the fact that investors begin EN masse to sell bonds to the U.S. Treasury and to seek more high-risk assets. In turn, this around the world will increase the cost of lending for companies and individuals, as sovereign bonds — the benchmark for calculating such metrics. The yield on 10-year bonds since the end of July rose by 35 basis points, and analysts believe a major factor in this improving prospects of the Democratic party.
However, in the long term, victory for Clinton not too much will increase the yield of these securities, at least while the Republicans will maintain control at least one house of Congress as the plans of the Democrats on fiscal stimulus policy is radical, especially in comparison with the trump plans to slash taxes and increase spending on infrastructure.
Victory Trump:
Within two weeks after the UK voted to secede from the EU, the yield on 10-year bonds of the us Treasury fell by 39 basis points and did not return to the values of June to September. Something similar will happen in case of a victory trump: for example, Credit Agricole estimated effect 10 basis points. After some time, the yield can begin to grow, given the reduction of taxes and increase infrastructure spending, especially if the Republicans manage to win a majority in the Senate and in the house of representatives. Effect will increase if the isolationist foreign policy of the Republicans will force investors to sell bonds.
The increase in budget expenditures will have a positive impact on the profitability of papers related to inflation, and this year they have already demonstrated the result of higher nominal value. Assessment of Bank of America, bond yields will not change only one, the least probable variant: the President of the trump and the Democrats, who control both chambers of Congress, as they will block the decision on the mass tax cuts.
The foreign exchange market
Victory For Clinton:
The dollar strengthened against the currencies of other developed markets, while investors will focus on the likely raise the key rate at the December meeting of the fed, notes Capital Economics. Further, according to the forecast Bank of America, the dollar will rise, but only if the Democrats manage to get a majority in Congress.
To win, Clinton will have a positive or neutral effect on all the currencies of the developing countries, except the Russian ruble, according to Societe Generale.
The greatest benefit from the defeat, trump will receive Mexican pesos. Over the past year, analysts have repeatedly used the peso as a barometer, which measures the probability of winning trump in the election: the higher the rating, the lower down the peso, and Vice versa. Largely dependence was based on the fact that the Republican promised to get Mexico to pay for the construction of the wall between the two countries in case of victory. Also, if Clinton wins, seriously strengthened and the Chinese yuan, said Sean callow, chief strategist at Westpac Banking in Sydney.
Victory Trump:
In the case of a shocking victory trump the dollar immediately weakened relative to the currencies of developed countries, particularly the yen, Euro, pound sterling and Swiss franc, due to concerns that Chinese investors massively dumped on the market us bonds and the fed will postpone the decision to raise the key rate. Within 3-9 months, the dollar may return to their former positions, if the Republicans consistently take a number of decisions to stimulate economic growth. The obvious way to dramatically drop the rate of Mexican peso (for the reasons described above), and aggression trump against China and South Korea will lead to the weakening of the yuan and the won, said Bank of America. The Russian ruble got a little stronger, but in the long run, this effect may disappear, because no one can predict the actions of trump’s foreign policy.
Emerging markets
Victory For Clinton:
The victory of the candidate from Democrats is a good chance for emerging markets. Investors can begin to invest in the shares of Chinese defence companies and the participants in the commodity market can increase revenues in anticipation of rising demand for us bonds in connection with the gradual growth of the infrastructure costs.
Victory Trump:
“I don’t see any country that would benefit from a victory for trump,” says Margaret young. Report of the company Evercore mentions one country for which this event can cause economic growth, and Russia.
However, the overall situation will Arduino: estimate by Citigroup, the emerging markets MSCI index will fall by at least 10%, mainly due to a sharp deterioration in the positions of the Mexican peso. Also very hard to have China against which the trump is likely to impose various protective duties, which will weaken China’s economy by depriving it of access to the huge American market. In General, protectionist policies of Republicans have a negative impact on countries that are export oriented, such as South Korea, Taiwan, Singapore, Thailand, Philippines, Malaysia, Vietnam and to a lesser extent India and Indonesia.
Commodity market
Victory For Clinton:
The desire Clinton to increase the number of “green” energy and concern about climate challenging work for companies engaged in mining and sale of coal and oil. Benefits can receive the natural gas market, which is considered not causing harm to the environment, as Clinton plans to relocate many power plants from coal to gas it.
Victory Trump:
In case of a victory trump gas prices fall and coal, by contrast, will grow. The Republican promised to repeal the laws restricting the use of coal. In this regard, Bloomberg Intelligence analysts evaluate the possible reduction of gas demand compared to the current year by 11% by 2030. Also, increase in oil prices, gold, platinum and silver. It is also possible to improve the position for copper producers in connection with the necessity for expansion of infrastructure.
