On 20 January 2017, Donald Trump was sworn in as the 45th President of the United States. Here’s a look at how this influenced investment markets across the world.

One of President Trump’s first executive decisions was to withdraw the US from the 12 nation Trans-Pacific Partnership (TPP) deal. He also indicated his intention to introduce a border tax.

While this is consistent with what he said during his election campaign, and had been well signalled to financial markets, President Trump’s actions spurred nervous investors to seek safe haven assets.

Ultimately, though, the move in markets has been relatively minor to date, probably because his actions didn’t come as a surprise.

While Australia is likely to be impacted by the US withdrawal from the TPP deal, we still have free trade agreements with nine other countries including China, Japan, Korea, New Zealand, and the Association of South East Asian Nations (ASEAN). While the US is a key trading partner, it is important to note that Australia’s three largest export markets are China, Japan, and Korea.

There are broader market concerns that President Trump’s actions may trigger an international trade war. President Trump has reportedly prioritised re-negotiating the North American Free Trade Agreement (NAFTA) with Mexico and Canada to stop the offshoring of US manufacturing jobs.

Withdrawing from the TPP deal arguably strengthens President Trump’s NAFTA negotiating position with Canada and Mexico. In the event of an international trade war, the risk is that this negatively impacts global economic growth, with the potential that this precipitates a global recession.

Notwithstanding negative news coverage about his decisions, it should be noted that industrial production shows signs of strengthening in Asia with large positive surprises in India, Taiwan and South Korea, consistent with a view of a good pickup in global trade.

What shifted – in numbers

On the day Trump withdrew the US from the TPP deal, US Treasuries rallied, with 10-year yields falling by 6.6 basis points (to 2.40%), 5-year yields falling by 7 basis points (to 1.87%) and 2-year yields falling by 4.5 basis points (to 1.14%). Lower yields translate to higher bond prices and are generally good for Qantas Super’s fixed interest investments.

Equities performance was slightly weaker, in the US the S&P500 decreased by 0.44% (to 2,262), while the Dow Jones Industrial Average decreased by 0.26% (to 19,775). Not all sectors were down however, with the technology heavy NASDAQ index increasing by 0.30% (to 5,555).

Looking forward

Short term market volatility, driven by an uncertain political and geopolitical environment, present both risks and opportunities to investors and re-emphasises the importance of Qantas Super’s investment approach – namely, holding a broad mix of assets (ie Equities, Infrastructure, Property, Fixed Interest, Cash etc) and adopting a long-term investment horizon.

Want help working out what this means for you?

Give us a call on 1300 362 967 to talk about your situation or to make an appointment with a financial adviser who knows Qantas Super.