Israeli experts eye effects of US election on future of global markets

Financial experts explain what this US election can mean for the future of the global market.

November 10, 2016 04:57
2 minute read.
A TRUMP poster is displayed on the floor of the New York Stock Exchange

A TRUMP poster is displayed on the floor of the New York Stock Exchange. (photo credit: REUTERS)

As the election results drew nearer, stock markets around the world registered losses as the US dollar went down and investors began abandoning risky stocks in favor of stable investments. However, since the announcement of Donald Trump’s victory, Wall Street in particular went on a renewed upward climb with the dollar reversing its overnight losses.

Financial experts explain what this US election can mean for the future of the global market. While most agree that the negative trends of the past 24 hours are a natural reaction and no cause for alarm, they also expressed concern for the future, and all agreed that it is way too soon to tell.

“It looks very much like the market is simply adjusting to an unexpected result. Since everyone was expecting a Clinton win, the Trump result wasn’t priced in,” Dr. Asher Meir, head of economic research at the Kohelet Policy Forum, told The Jerusalem Post. “It doesn’t look like the market is fluctuating completely out of order and is already visibly balancing.”

Dr. Assaf Zimring of the Cornerstone Research Group agreed.

“As of this morning it seems that the US markets had time to digest the news of Trump’s election, and the indexes have stabilized since,” he told the Post. “There are still reasons to be pessimistic, but we’ll need to assess the global markets in a few months to see.”

Economists and financial experts are less concerned about the immediate and short-term results of the elections and more worried about the long-term implications of the Trump presidency, should he actually start advancing his campaign promises.

“If Trump actually implements the protectionist agenda he campaigned on, it’s likely to trigger China and Europe into a trade war, which will be especially harmful for world markets,” Meir said.

According to Ori Greenfeld, chief economist and strategist at Psagot investments Group, the worst-case scenario is a global trade war between the US and China, as such an event would have negative implications for the entire world and Israel specifically.

“If Trump really attempts to fulfill his promises toward China, it will cause the Chinese economy to slow down, and it’s not been doing that well anyway in the past few years,” he said.

According to Zimring: “If Trump, for example, cuts imports from China, it would mean that China will have less dollars to spend on foreign trade and will in turn cut imports to. Now, the repercussions of China cutting imports can influence other economies that export to China; Israel is one of those economies.”

While experts are not convinced that Trump even has the ability to “make good” on his campaign promises, they do believe that trying to implement them, such as cutting imports from China, will have negative consequences.

“It’s not by chance that all of the American economists I know, including Republican voters, staunchly opposed Trump and think he is a dangerous stooge,” Prof. Omer Moav told the Post. “But the bottom line is: No one knows what Trump’s actual policy is and what he can actually do; it’s unlikely he can do much to cause dramatic economic shifts. He can, however, act in a way that will lead to a global recession.”

According to Zimring, there is a consensus among legal and political experts in the US that the president does not have the constitutional authority to do most of what Trump promised in his campaign.

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