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Trumponomics Explained

Thursday, January 26, 2017 4:36 AM GMT

Everyone is talking about Trump these days, and how he will affect the world economy as well as financial markets. Therefore, it’s a great opportunity to understand how Trumpconomics will move specific markets like Equities, the US Dollar, and Gold.

Trump promised to create fiscal stimulus especially in infrastructure and defense. This will help boost equity markets by increasing economic development and industrial production.  This will also drive US Dollar upwards as more spending leads to higher inflation and interest rates. All factors will push investors away from Gold as they focus on stocks.

He promised lower corporate taxes from 35% to 15%. The impact will act similar to fiscal stimulus. This means higher equities due to better corporate earnings, stronger US Dollar due to economic growth and Gold lower, as investors prefer stock markets. 

Then he promised to loosen Wall Street’s heavy regulation which will push US equities again and US Dollar while suppress Gold. 

He continues promises to increase jobs, as he will “force” retaining and creating jobs in the US. 

Following similar reasoning, less unemployment leads to higher spending and demand which leads to growth so equities up again. FED will go hawkish so higher rates as well in US Dollar. Investors will continue to keep Gold away from their radar.

Lastly, Trump promised more protectionist trade policies by placing restrictions on imports. This action may cause troubles for US companies with non-US activities thus stocks may be negatively influenced. Trade wars due to international currency manipulation may not help the US Dollar. If this is the case, investors may look towards safer investments such as Gold.

US30/Dow Jones reached 20.000points yesterday for the first time while both SP500 and NAS100 outperform. 


Let’s check the daily charts:

US30 Daily


SP500 Daily


NAS100 Daily



 






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