The big day has finally arrived, today marks the day the USA swears in the 45th president of the United States of America. In what has arguably been the most controversial presidential election in recent history, Donald Trump defied pundits and naysayers alike as he took a majority lead in the US elections. Markets grew weary of a Trump victory as the election continued with large sell offs in US equities and the US dollar. The day of his victory, Trump delivered a speech which had markets do an aggressive about turn, as he took a “good for Business” tone, in which he alluded to retracting stringent regulatory acts against banks, ensuring tax breaks and a robust fiscal stimulus program which all saw the USD and equities gain aggressively with the USD trading at levels not seen in 14 years while US equities went from strength to strength, making new highs. In recent trade, we have, however, see markets unwind some of the “Trump Bump” as the USD is off its best levels while equities trade in the red with the DJIA printing its 5th day of losses yesterday.
Today’s speech by President Trump, will be scrutinized by all traders and businesses as they look to see if he confirms his bullish tone with regards to abolishing large parts of the Dodd Frank Act, which sought to regulate banks more stringently in the aftermath of the financial crisis, and which would give bank shares a second wind as they continue to reach for the sky and subsequently driving up other sectors of the economy. Also, on the watch list will be comments on fiscal stimulus and tax breaks which are expected to ease pressure on companies and bolster profits which will also boost equity prices while seeing large flows of foreign currency in to the USA which would result in strong demand for the USD which would in turn see the USD INDEX, which measure the strength of the USD against its peers, reach for new multi decade highs.
As with everything in life, there must be balance and should Trump be seen to be reversing his previous stance, calling for the maintenance of the Dodd Frank act and a hold on fiscal stimulus, we would see an aggressive unwind in equities and the USD as they quickly retrace the gains made in the previous months since his election.