WHILE THE WORLD may be stunned by Donald Trump’s win, you’ll most likely find things will not be nearly as bad as everyone thinks.
And that’s reflected in the huge rebound in the stock market — once investors began studying his policies in more depth.
How did Trump achieve the Win?
In many respects, the media is responsible for the outcome — because so much airplay was given to his outlandish rhetoric.
However, the truth is that the media always seemed to take Trump literally … but it never really took him seriously.
The good news is … his advisers are already starting to distance him from some of the most rash promises — like making Mexico pay for the border wall.
While Trump has talked about building a wall along the Mexican border … in reality, he will probably merely introduce far tougher controls – much the same as Australia is currently implementing with the boat people. And likewise, place tougher immigration requirements upon Islamic countries.
As the dust settles, people are starting to realise that the tax breaks for companies and huge infrastructure spending can only serve to stimulate economic growth.
For the Economy
Global markets — particularly bond markets which have seen a rise in yields — have interpreted Trump’s win as inflationary, given his pre-election vows to cut taxes and increase infrastructure spending. All of which would lead to an eventual increase in US interest rates.
There is a strong correlation between commodity price growth and wages growth — because commodity price growth boosts corporate profitability, and that flows through to higher wages.
As inflationary pressure builds, a rate hike in the US means the rest of the world would most likely follow suit — although not immediately.
As I’ve often mentioned in these articles, rising interest rates impact the various property sectors differently.
Clearly, the first affected will be the residential market; and that will quickly flow through to discretionary retail spending for things like fashion, footwear, accessories and so on — with the least affected being restaurants and food retailers.
About six months later, there may well be some affect upon warehousing — because certain retailers will reduce their storage requirements.
However, historically, the office market is relatively immune to rate rises — being mainly affected by oversupply from excessive construction activity. And the only office markets currently suffering from this are those in Perth and Brisbane.
Bottom Line: Obviously, time will tell — but I can’t see the world suddenly coming to a grinding halt, as a result of the recent US election.