Saturday, 5 November 2016

Hillary Clinton vs Donald Trump: How does it affect the Singapore Stock Market?

Who will win the US Presidential Election? 
As the US Presidential Race heads into the final week, how is it affecting the Singapore market?  Just 1 to 2 weeks ago, major polls results point to Clinton having a large leading position over her opponent, Trump. Stock market rose in both US and Singapore. The US dollar rose as well.  

Surprisingly, coming into the final week before the election on 8th November, we hear news that the race is tightening between the two candidates. The market reacted negatively to this latest polls results and the Singapore stock market, STI has not been spared. STI ended this week at 2788.80, below its support of 2800 points. The US Dollar did not perform well this week either, dropping off its recent high.

Clearly, the market perceives Trump as volatility to US politics and economy. The new relationship dynamics with other powers such as Russia and China could breed instability for the US. Therefore, a Trump victory will probably cause both the stock market and USD to drop in the short term until further news from the new Congress.

A Clinton victory signals stability in both political and economic policies. In my opinion, the stock market could rebound on Clinton's victory as it has partially accounted for a shock Trump win. Recent economic indicators from the US seems to be rather positive and the expected FED interest rate hike in December 2016 could go ahead if economic policies remain unchanged.

What can the average retail investor in Singapore do to generate the best return on your money? With the support of 2800 broken, STI could be heading further south. As mentioned above, Trump might bring volatility which causes investor to move their funds to safer assets such as bonds. As for Clinton, we have rising interest rate for the US, which could lead to a transfer of funds from Asia and emerging markets to the US. Unless you are fully invested, it is advisable to remain patient, and wait for a market direction. For those fully invested, you could consider shifting some of your portfolio to safer assets such as bonds or cash.

In reality, Singapore's economic growth should be subdued based on latest forecast from economists. Further, total employment rates are also shrinking according to recent reports. As such, in my opinion, even if there is a bull run in 2017, it could not be sustained without the support of a growing economy.


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