So, as we all know, this has been one of the weirdest elections in a while. The market crashed right after results showed Trump's win but immediately recovered and indices rallied.
Now, I can see how all these gains may be justified by future earnings, assuming Trump does deregulate everything and boost consumer spending while adding "millions of jobs" -- something I'm very iffy about considering that his stance on global trade WILL have a negative effect on both the US and emerging markets. I can see how that last statement may be a bit controversial and not well taken by some, but I think it's not far out from reality.
Mexico's president, Enrique Peña Nieto, took a firm stance against Trump and the border wall. I assume that since the US withdrew from the TPP, and China has been considering replacing the US, the Mexican president recognized this and is using it as negotiating leverage. While the repercussions of exiting NAFTA may be somewhat significant to both Mexico and the US, Mexico is left with a viable partner that can fill the void the US would leave on Mexico. Mexico can now comfortably back away from NAFTA and go about its business without the US. This, is pretty far fetched, but a possibility nonetheless.
With the world in the brink of a 3rd world war, and countries experiencing the rise of populism and nationalism, it seems that a lot of countries will leave money on the table by opting out of trade agreements rather than renegotiating them. As I stated in the beginning, the rally in US equities can be justified through many assumptions of what to come, but just because it can be justified, it does not mean that this will come to reality. Why aren't analysts pricing all of this in or being more cautious on what's to come? Considering that Trump has the lowest approval rating for an incoming president in decades, I think Wall Street is not factoring in the observable facts. South Texas just experienced a decline of 4% in sales due to a stronger dollar. Also, border wait times from Mexico to the US are the lowest they've been in my 26 years in this planet (Take out 4 years or so. I'm pretty sure I don't remember shit from then). The VIX is extremely low, shouldn't it be higher? What am I missing? I know it prices volatility based on short sentiment, but does Wall Street really think economic prosperity will come with Trump's administration? In my opinion, we were already there, and this growth in equities seems sketchy. Many countries will have an eye on the US and will be vigilant that the US does not break any agreements, which will probably do so in climate change and other areas. I don't think that they will be able to actually implement that much deregulation and boost the coal and oil and gas industry as much as they promised. There will be pushback from many people as well as many other countries.
Am I over reacting? Do I sound too gloomy? Am I entirely wrong? I don't know, that's why I'm here -- asking for insights and a new perspective.
Submitted January 28, 2017 at 01:04AM by ghigareda1 http://ift.tt/2kwnlc5
