A Trump Win Will Push Markets Lower, But This Won't Last Long

KGI describes the recent election of Donald Trump to the White House as a political black-swan event, the impact of which may not last long.

Black Swan Rises

"Black swan" is a term used to describe an event that comes as a surprise, and has a major effect. Historically, political black-swan events make markets panic initially, but the impact is typically brief.

“Our assessment is that the impact will be greater than the Brexit but milder than the US debt de-rating,” analyst Jeff Chang wrote in a note.

Chang pointed out that the U.S. debt de-rating in 2011 caused U.S. stocks (S&P 500) to fall 11.3 percent in five days. The analyst noted that the U.S. governmental shutdown in 2013 caused U.S. stocks to drop 2.7 percent in eight days. Earlier this year, the Brexit event sunk the U.S. stocks by 5.3 percent in two days.

Global Impact

Chang continued that a Trump win will hurt global stock markets, emerging market currencies, and bonds, while Japanese yen, gold, U.S. debt, and the U.S. dollar will be safer bets.

“Trump may have espoused protectionism in trade and an anti-immigrant stance during the election, but a few major policies he stressed when campaigning are actually good for the development of the defense, energy, tobacco, financial, and healthcare industries,” Chang highlighted.