The Trump card is overrated

Do you know what is called an obsession with one topic? It’s a situation when ten out of ten “major” news of financially oriented press agency Reuters providing online data from the financial markets has in its title the word “Trump”.

So it is pretty obvious with what is “officially” being the movement of almost any exchange rate, stock or yield explained even if it had absolutely nothing to do with America or Donald Trump. But let’s look at the current financial events without emotions.

Especially today is being ruled by the drop of the vast majority of the European stock markets (we can’t judge the American ones just yet). Many of them are getting to their weakest values in this year. The reason? We have been talking about it last week already: Trump started his days in the office with comments that are clearly pointing at the intentions to issue protectionism in the foreign trade. Even though some individuals can think about the profits and losses of such attitude whatever they want the financial markets as a whole are clear about the matter: They perceive any protectionism always completely negative.

You surely remember the prognosis that if Trump wins the presidential elections the stocks will sharply drop – which got confirmed in the end for a few hours so the belief that he “surely didn’t mean it seriously with the protectionism and it was only pre-election talks” would prevail afterwards. And as a reaction to that, the drop of the stocks turned into growth. And now almost like retrospectively the scenario which was expected right after the election started only additionally coming true: When the opinion that in the question of protectionism it wasn’t only the pre-election rhetoric started prevailing in the end, the stocks started reacting to that, how it was predicted that they will react right after the elections.

When we look at it with bystander’s eyes we can’t not notice really strange phenomenon: The stocks and the dollar were not long ago relatively sharply rising because of the assumption that Trump will wake economic growth in the USA. Now both are dropping because of the assumption that Trump will establish protectionism and cools down the global economic growth that way. To be honest neither of those assumptions have much support in facts or arguments – the Trump card is overrated.

One human with strong opposition in Congress on top of that can hardly wake up the economy to such dramatic growth just like one human can hardly take the economy radically down – not to mention that the theoretical economics know that the monetary politics of the central bank has much bigger and faster effect on development of GDP than the fiscal politics of the government. So the financial markets are overreacting on both sides – however overreacting has been always typical for them. The golden middle road would most likely better match the real judgment of the situation.