Can Trump offer more than rumor?

It is good to look at the financial markets from bigger outlook from time to time. When you are observing only individual days you can’t see the wood for the trees. And right now the look from above is appropriate. A look on the stocks is showing that we have seen something since D. Trump has been elected what we wouldn’t believe in a year ago.

Donald Trump has managed to catapult the global stocks upwards without doing anything at all to achieve that. It was enough to say and promise that he is going to lower the taxes and increase the investments. Index S&P 500 in reaction to this vague promise skyrocketed high since Trump has been elected to the office by 13 % until 1st of March. Here it reached its peak and since then it has been slightly dropping. It was similar with German index DAX: It was growing until 16th March. Until then it added 16 %.

What is juicy about it is that since D. Trump’s election to the office up until now we haven’t found out how Trump is planning to fulfil his promises. Instead of talking about how the taxes are going to drop it is being talked about Obamacare or about how Trump’s connection to Russia is going to be investigated. Basically, it is being talked about everything else but about what is important for the financial markets. And it seems that the financial markets got fed up of it.
Trust has vanished basically from one day to another just like when a flock of starlings scatters after a gunshot. On Tuesday the stocks experienced the biggest drop in the USA since the election of Trump and now we are observing resonance of this drop in Europe too.

I think that the stocks are definitely overheated and it’s long-term. But that doesn’t mean that long-term drop of the stock markets started with this. D. Trump can still manage to save everything if he introduces a specific and trustworthy plan. Or he can freely continue staying mysterious like a haunted castle in the Carpathian Mountains if he accompanies it with sufficient hyper-assertiveness and persuasiveness. But so far we have only been hearing from him something in the style of the good old but pretty insufficiently persuasive motto “Everybody is stealing!” And that probably won’t be enough for speculators anymore...

Marketa Sichtarova & Vladimir Pikora