Trump and Markets

The markets have long celebrated Trump, but disillusionment is slowly starting to set in. The first disappointments will come soon.

The stock markets are slowly noticing it too: Donald Trump is unpredictable and may be a threat to the stock market rally. Up to now, the markets have been enthusiastically hailing the president-elect, who will be inaugurated next week. American share prices have risen by 10 percent since the election in November, and the German Dax index has been rejoicing too. But on Wednesday and Thursday, the stock markets took fright for the first time.

Trump’s approach in his first press conference since his election victory wasn’t quite as conciliatory as it was just after the election. He launched another attack, which was a reminder of what worries everyone: protectionism and punitive tariffs and populist intervention in the economy. This time it was about the pharmaceutical industry. He said that drug prices were too high; firms now fear a price cap. He didn’t tone down his rhetoric against Mexico either. Trump still wants to punish American firms that invest there and not at home. Some firms have already been under pressure in recent weeks as a result of his infamous tweets. At the same time, the public heard little at Trump’s appearance about the programs that have been driving up the markets: tax cuts and infrastructure spending.

Even Analysts Are Warning Against Too Much Euphoria

The stock markets initially reacted negatively and fell. Although they rose again on Friday, the markets have been warned: Trump is not just bringing rising prices.

It could even be that the Trump rally is reaching its end. The most significant momentum has been over since the middle of December, and prices are bobbing along at more or less those levels. Only the technology stocks on the Nasdaq Stock Market have made small gains. More and more analysts are warning against too much euphoria. Trump’s reactions from next week onward will quickly show which of his proclamations he will turn into law, and to what extent. That could cause some disappointment in terms of tax cuts and increased spending, and dismay in terms of other measures. It is not the best time to buy stocks, especially given the already high prices. And German stocks won’t be able to escape an American dizzy spell.