In recent weeks we have heard a lot about how “the market” loves Donald Trump’s policy ideas. The question however is which “market” are we referring to? If it’s the U.S. market you are referring to then yes, stocks are indeed up since Donald Trump won the presidency.
If however you are like most people and live in a more global economy, then “the market” you participate in is actually down since Trump won the election. So despite all the noise about how great the market is doing, in reality the market doesn’t like Trump’s policies as much as some news stations would have you believe.
When it comes to getting a true representation of “the market” it’s all about the Global Financial Asset Portfolio (GFAP). It is this portfolio that houses all global outstanding financial assets.
Since it has no home bias it is the only aggregate portfolio that reflects the market of financial assets in an accurate manner. It is therefore the only relevant benchmark that should be used when looking at the current status of the global financial markets.
Based on the Global Financial Asset Portfolio, “the market” is actually down by 1% since Trump secured the presidency. Keep in mind this is only 1% which is not very much movement at all. It is therefore nothing to be worried about or nothing to get excited about.
If you look at this through an aggregate lens you will see that the world didn’t think much about Trump winning. They woke up the day after the election, saw that Trump won and quickly got back to business as usual.
As far as the U.S. markets go, stocks and bonds are only up about 0.4% since the election. And while U.S. markets did respond more positively to Trump’s win, a 0.4% increase isn’t that much of a gain. We are basically in the same position as we were the day before Trump won the election.
If there is one thing you can take from the lack of movement in the financial markets it’s the fact most markets are concerned about protectionism. This can be seen in the stocks and bonds in emerging markets that have taken a hit as well as in foreign currencies.
At this point it’s safe to say no one really knows how the global economy views a Trump presidency. We will all just have to take a wait and see approach.