World Shares Struggle as Traders Navigate Trump's Economic Landscape
Global financial markets are experiencing jittery movements as they grapple with the repercussions of Donald Trump's economic policies following his election victory. From currency fluctuations to sector-specific responses, investors are keeping their ears to the ground as they assess the climate shaped by the newly elected president.
On November 18, 2024, world shares displayed mixed results. European markets dipped, with Germany's DAX losing 1.3% and France's CAC 40 declining by 1.5%. Conversely, the Asian markets showed resilience with Tokyo's Nikkei gaining 0.5%. The shifting dynamics reflect apprehensions about potential U.S. economic policies tied to Trump's administration, particularly concerning tariffs and trade relationships.
One area of focus is Trump's proposal for broad tariffs on imports, which raises questions about its impact on markets globally, especially for key trading partners like Canada. Analysts speculate the tariffs might not apply to Canadian oil, paving the way for enhanced cooperation between the U.S. and Canada. Heather Exner-Pirot, advisor on energy to the Business Council of Canada, voiced, "I think the U.S. will need more Canadian energy regardless of what they do themselves." This sentiment reflects optimism among Canadian energy sectors amid speculation surrounding U.S. policy shifts.
Meanwhile, the chip manufacturing giant Nvidia is under scrutiny as it prepares to release its quarterly earnings, which could dictate market movements significantly, particularly within the tech sector. Expectations are running high, as Nvidia’s stock has already surged 183% earlier this year, underscoring the volatility and pressure the tech industry is currently facing.
Traders have begun to recalibrate their expectations by reassessing outlooks for interest rates. With the looming threat of inflation returning due to Trump's fiscal strategies, such as tax reductions and deregulation, the market is bracing for potential shifts. Stephen Innest of SPI Asset Management notes, "The broader market sentiment remains cautious…because reasonable fears of a looming global trade war cast shadows over bolder directional moves.”
The U.S. dollar showed signs of wavering against major currencies. On Tuesday, it fell against the Japanese yen and the euro, retreating from significant gains seen post-election. This decline adds another layer of complexity to the already tense foreign exchange market.
Trump's promises of economic revitalization straddle concerns around inflation and interest rates. Investors are becoming increasingly anxious, as heightened Treasury yields suggest tighter monetary conditions may emerge as the Federal Reserve navigates through these turbulent times. Amidst this backdrop, concerns around inflation could tie the Fed's hands, complicate its strategies to lower interest rates, and stifle job creation efforts.
Above all, the potential for renewed tariffs sparks significant apprehension about the future of trade agreements. There lies uncertainty about what Trump’s administration will mean for economic collaborations, particularly with Canada, where most exports head to the U.S. Michael Catanzaro, former advisor on energy, suggests there could be opportunities for the two nations to reinforce their energy partnership, emphasizing, "We should double down… the U.S. and Canada can be this powerful force."
Market analysts also stress the importance of who Trump may name as Treasury Secretary—an appointment expected to resonate across global markets. Investors are eager to see someone skilled at managing the ramifications of Trump's ambitious economic policies, especially as many analysts highlight the reduced pace of U.S. transitions to green energy under the new regime.
Domestic commentators have expressed concern about how the broader U.S. energy transition could be jeopardized by Trump's nationalistic tendencies. A shift away from renewable investment could delay the progress toward net-zero emissions, with some experts now predicting decreased deployment of renewables. The administration’s traction on climate policies, bolstered by bipartisan support for the Inflation Reduction Act, seems stable for now but is at significant risk as Trump’s agenda develops.
Despite this, pockets of optimism linger, particularly for sectors linked closely to classic energy markets, like oil and gas. Expectations remain high for companies like Lowe's, Walmart, and Deere, which are set to announce quarterly results, providing signals on the overall economic health.
Overall, as the incoming administration routes its way through various economic challenges, the global market will continue to react with binary caution—heeding both the threats and opportunities presented by Trump's policies.
