November 8, 2016

Expect a Trump Win and Violent Market Repricing

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Image result for donald trumpApart from the election, all other stars seem aligned for a rate hike. The IMF gave the Fed a green light in terms of emerging-market expectations. Persistently dovish voices such as Charles Evans of the Chicago Fed and Lael Brainard, a Fed governor, have either been supportive of a rate hike or have remained silent lately.

The only thing that could throw the Fed off this path would be if a 10% stock market correction from a Trump win turned into a 15% or 20% collapse with global contagion. However, I expect that once the 10% correction is over, investors will take a second look at Trump’s policies of low taxes, less regulation and big infrastructure spending and like what they see. This means stocks may stage a post-election rebound soon after any correction.

But for now, a December rate hike is in the cards and almost nothing can stop it.
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2 comments:

  1. Sir, Trump/Hillary ,these are all gimmicks. They are simply looking a solid reason to correct mkt at least 10%.This is because the the rally from February 16 does not have any powerful reason to go up to @ 8979 in respect of micro aswellas macro factors.Let us not be impatient ,particularly ,investos,.Wise investors will wait atleast up to 8200.

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    Replies
    1. Option writers also do not expect 8200 to break. For next series, 8000 is a strong support.

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