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Trump triumph wrong-foots ‘The Establishment’

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In the eighties, the ‘Not the Nine O’Clock News’ team played a sketch where two politicians were engaged in the most violent, defamatory debate. When one of the participants suddenly had a heart attack and died, his opponent immediately eulogised his deceased ‘friend’, describing his career and character in the most glowing terms. A similar change came over President elect, Donald J Trump this morning, as he addressed the nation, though he stopped short of eulogising Hillary. 

Gone was the fiery rhetoric and antagonistic display. In their place was an appeal for unity and a declaration that the new administration would act for all Americans and ‘serve the people’. Doubtless this will still involve ‘draining the swamp’ but Trump’s first address in his new role was certainly more statesmanlike than many had feared. Since the Republicans now also control both Senate and Congress, Trump will stand a good chance of actually getting things done and his big focus will be on infrastructure, which he promised would make the US second to none. The potential downside to this is that some of that money will apparently come from cancelling all payments to UN climate change programmes. 

Perhaps Trump’s new-found moderate tone was the reason that, while Asian markets fell sharply, the Nikkei closing down over 6.5%, for example, trading in Europe this morning has been extremely calm to say the least. GBP/USD, GBP/EUR, EUR/USD and the FTSE 100 are all virtually unchanged, although the Mexican Peso has lost almost 10% against the dollar. Gold is up a little but not so much as to portend imminent disaster.

As was pointed out during the campaign, there were similarities between the US election and the UK Brexit referendum. This comparison even extended to the odds. It was possible yesterday afternoon to back Trump at 9/2. Once again, the fact that the establishment has been completely wrong-footed was manifest in the tone of the reportage. Just like 24 June, many whose job it is to report such events could this morning scarcely believe what had happened.

The world must now await Trump’s inauguration on 20 January, to see what policies he will actually enact, some of which are more controversial than others. A wall with Mexico seems unlikely but the promised deportation of two million immigrant criminals will be harder to avoid and will not look good on film.

As the dust settles on the riveting – and, at times, appalling – US election, it is hard to escape the conclusion that the process of anti-establishment shocks has further to run. In Italy, Matteo Renzi’s referendum on constitutional reform is on 4 December and there is every chance that he will lose, ushering in the anti-EU and anti-euro 5 Star Movement. Next year sees French presidential and German elections and, electorates everywhere are in a strange mood. 

For the moment, despite the shock, the calm of the financial markets is probably down to the fact that participants believe in the power of central banks to continue to ‘make everything alright’ with continuing accommodative monetary policy. The efficacy of that policy has come into question of late, and besides, did Trump not say during the campaign that he wanted to sack Janet Yellen and have the Fed raise rates aggressively?      

All views expressed here are the author’s own and are based on information and data available at the time of writing.

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