The clock is down to two days, and counting, before the U.S. presidential elections finally end. A stop on all the insults and bad-blood between the candidates will mean a lot for investors and traders alike. The current market is fragile. This calls for investors to trade carefully. This market will recover from the tense elections race based on which candidate wins.
On the one hand, we have the Republican Trump, and on the other hand is Clinton, the Democrat. Financial markets will either fall or rise depending on the outcome of the elections. What implication does this have on CFD traders? Are there any chances for them to utilise the uncertainty the election has bred?
Financial markets are facing two possible routes. The first one, if Trump wins, there will be an improvement in trading deals with the known trading partners of the U.S.; he seeks to make investments an easier venture in America. Besides Trump’s plan to lower the taxes so as to boost the economy, he also has promises to loosen the federal rules and regulations on the market. Clinton thinks it would be wiser to either keep the tax rates the same, or raise them.
If Trump’s plans go through, then the market will benefit in the short term, but in the long run, this same market will go back to a place of uncertainty. Trump seeks to repay the U.S. debt, an action that will shift the entire economy of the world. The strength of the dollar depends on this debt.
Trump’s views on the use of nuclear weapons and trade protectionism will also put the market at a place of risk. This will force traders to withdraw from the U.S. market and pursue other foreign investments. Reducing taxes could however increase stock prices for some markets, and the companies not favoured by the previous tax situation could gain a profit from Trump’s win.
The survival of financial markets in the U.S. depend on the strength of the dollar. Trump’s win could see the U.S. dollar weaken after the first few months, then go back to a place of volatility. It may rise again after a while, but in the long run, Trump’s policies will see the dollar weaken and the national debt further increased. Looking at the dollar and the Chinese Yen combinations; we see that both are strong currencies, but if Trump wins, then trading on these combinations will not be such a good idea.
His views on China are that the country is manipulating currency so to win at the trading game. Other major currency trading combinations like GBP/USD, EUR/USD and the USD/JPY will also be affected by whether Trump or Clinton wins. The USD/MXN pair is predicted to hit new lows if Trump wins; traders are therefore advised to either stay away from such currency combinations or trade in them as little as possible.
Clinton’s win is looking especially good for the strength of the dollar. She is hinged on reducing the level of uncertainty in politics that has been crushing the market from above. In her reign, the Central Bank of America and the FED will change the interest rates and make the market as fluid as it was before the elections. Clinton is against Russia, while Trump is against Mexico and China, thus the emergence of new market opportunities in the said countries and in Peru and Turkey will largely depend on who wins.
Lastly, on the Trans-Pacific Partnership Agreement, a deal that will see to free trade among 12 different counties. This treaty will account for 25% of world trade and account for 40% of the economy. Under Trump, this partnership will either suffer some changes or it will be completely discarded. Under Clinton’s rule, however, the TPP is expected to thrive, providing more growth opportunities to trading markets.
Stock markets like S&P 500 and gold trading are expected to rise after a win by Clinton, but expected to fall if Trump wins. On the overall, traders feel that Trump will lose money for markets. However, Trump comes with a lower chance of hiking interest rates in December; something that will be beneficial to the short terms profits of most markets but not prospective economic future.
With this in mind, CFD traders will need to carefully analyse the changes in the socio-political atmosphere before they resort to make their predictions. Therefore, any changes that they will predict will greatly rely on their ability to weigh the forces in market.