After one of the (if not the most) divisive election campaigns in history and against all odds, Donald Trump emerged as the President-elect of the United States of America. Since the news filtered to the shocked world, global markets have been driven to levels not previously seen for almost 20 years, in what has been called ‘Trumflation’
However, the effects are not the same globally. In fact, they are double-edged depending on which of the markets you are interested. For emerging markets, it is a sad story as they continue to slump to their lowest levels in several years.
For example, the Malaysian ringgit dipped to be less than 1 percent from the 4.48 per dollar it reached in September of last year, the weakest level since the Asian financial crisis in the late 1990s. for the country’s equities market, the situation is similar as, on Friday, it experienced the biggest weekly exodus of shares since June when investors sold 1.1 billion ringgits ($248 million).
As expected, the woes of the emerging markets is a boom for the U.S markets. All four major U.S. equity benchmarks — the S&P 500 Index, the Dow Jones Industrial Average, the Nasdaq Composite Index and the Russell 2000 Index — climbed together to record peaks this week, Bloomberg reports.
In addition, the dollar has enjoyed its longest winning streak against the euro since its inception in 1999. American consumer spending is also enjoying a boost in confidence.
“Traditional correlations have broken down…Markets are operating under the assumption that fiscal spending in the U.S. is set to increase and these reflationary and supportive drivers for U.S. growth are sending U.S. assets — its currency, rates and equities — higher.” says Divya Devesh, a foreign-exchange strategist at Standard Chartered Plc in Singapore.
With emerging markets being the biggest losers of Trumpflation for now, Nigeria should expect no relief from a weakening dollar as it seeks to correct its own problems with the naira, its local currency, which has been falling abysmally since a combination of a plunge in oil prices, militant-induced lowered oil production and forex scarcity threw its economy into a recession.