Australian shares vulnerable to forecast of 5-10% drop in global shareprices if Trump wins US election

By @vitthernandez on
Donald Trump & Hillary Clinton
US presidential candidates Donald Trump and Hillary Clinton attend campaign rallies in Ambridge, Pennsylvania, October 10, 2016 and Manchester, New Hampshire U.S., October 24, 2016 in a combination of file photos. Reuters/Mike Segar/Carlos Barria

In July, stock market experts polled by Fortune said that if Republican Party candidate Donald Trump would win the Nov 8 election in the US, defence and infrastructure stocks would like rise. However, with just a day before the election, experts warn of a bleak market outlook for the long term.

They see a five to 10 percent drop in global shareprices as investors sell-off at the prospect of a Trump presidency. But safe havens such as bonds and the American greenback would rally, Shane Oliver, AMP Capital chief economist, predicts.

Oliver explains in a report that a poll victory by Trump – who is almost tied with Democratic candidate Hillary Clinton in most surveys – worries investors over Trump’s protectionist trade policies which could trigger a global trade war. He points out, “Australian shares would be particularly vulnerable to this given our high trade exposure,” quotes.

Big tax cuts and higher defence and infrastructure spending would initially provide an initial boost, but Oliver says on a long-term outlook, the US budget would blow out and protectionist tariff increases would likely cause a trade war with much high consumer prices and immigration cut backs boost cost.

One of Trump’s targets is China which Trump has several times blamed for stealing American jobs. He plans to impose a 45 percent tariff on Chinese products and 35 percent on Mexican good which could hit global trade.

It is not just AMP which has a pessimistic outlook toward a Trump presidency. Tim Harcourt, economics fellow of the University of New South Wales’ Business School, warns that the real estate billionaire could be the most isolationist, protectionist president since Herbert Hoover in the 1920. On the other hand, he says Clinton is perceived more as a steady hand since she has extensive political experience as State Secretary during the early years of the Obama administration.

The Australian reports that following the FBI ruling out any charges against Clinton over the new emails, the Australian dollar jumped to US$77.08 at 7:52 am (AEDT). The FBI said it did not find any wrongdoing by the Democratic candidate and it has not changed its recommendation in July not to charge her.

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