Global markets are shivering due to the sensational victory of billionaire Donald Trump in the US presidential elections: yesterday's morning they fell sharply, and then started to grow in the evening. In this regard, Vestnik Kavkaza asked the economists how Trump's presidency may affect the global economy in the short and medium term.
Advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house, economist Sergey Hestanov, in the first place pointed out that the reaction of the financial markets to any unexpected event always has both short-term and long-term effects. "The short-term effect is a drop in the value of risk assets and increase in defensive assets. That is why immediately after the news that Trump is elected, there was a decline in stocks and oil prices. At the same time, the price of gold rose, as gold is a defensive asset," the expert said, adding that the long-term effect will not be evident until the second half of 2017.
According to him, this is due to the fact that the transfer of authority in the US is a quite slow process.
In addition, he noted that the most important factor for the global economy is a change in interest rates by the Federal Reserve System. "If rates are raised, it can slow down the US economy and cause a significant decline in commodity prices. This factor is the most important for Russia," the expert explained.
He also spoke about how the markets will behave up to Donald Trump's inauguration, which will be held on January 20 next year. "Most likely, the markets will gradually calm down, and they will be much more affected by other factors that determine the movement of prices on the market," Sergey Hestanov believes.
Speaking about how the isolationist policy aimed at returning of American companies to the United States and the creation of new jobs in the country, will affect the global economy, the expert stressed that while it is very difficult to predict how Trump will fulfill his promises.
The chief economist at PF Capital, Yevgeny Nadorshin, said that the collapse of the markets due the news of Trump's victory was much more logical than their subsequent growth. "If Trump fulfills even half of his promises, in particular, a reduction of the US support for NATO, the world will not enter a period of dynamic growth and development: rather, we should expect significant growth in military expenditure," he noted in the first place.
Trump's isolationist program is rather negative factor for markets than the positive one, the expert explained. "Part of Trump's agenda is reduction of the US presence in the world, which had a positive role as well: the US served as a lightning rod and a stabilizer. If Trump carries out this part of his agenda seriously, it will increase the uncertainty in the world and would divert resources of many countries from ensuring their safety. Therefore, a morning market reaction seemed quite logical. It is not yet clear what caused the current optimism of global markets, and there are doubts that it will last long," Yevgeny Nadorshin said.
At the same time, it is early to judge the influence of Trump's plans for the return of American companies in the US and creating new jobs, as yet there is no certainty that these plans will be successful. "That's not necessarily true that multinational companies with headquarters in the US would prefer to return home. On the contrary, it is quite possible that they would prefer to move their headquarters to another country and make it the center of their profits," the economist drew attention.
"There are markets which promise much greater perspective. For example, India and China. Many modern large companies have already become supranational, and it would be very dangerous to put them with the choice to go back to national borders or continue developing along with the world economy, even for the leaders of very large economies," Yevgeny Nadorshin concluded.
