First published: Prospectmagazine.co.uk, 22/05/2017
Is the “Trump trade” toast? It remains to be seen whether scandal will prevent the president enacting his economic policies.
If you want to see how financial markets react to a political crisis, look at Brazil. Last Thursday, the Bovespa stock market index plunged 10 per cent as new developments in the corruption scandal around President Michel Temer increased the odds of his impeachment.
Apropos impeachment, the US S&P 500 index also had a wobble last Wednesday, falling by 1.8 per cent as Deputy Attorney General Rod Rosenstein announced a special counsel to take over the investigation into Russian interference in US politics.
But by Friday, the US market was barely lower than it had been before. The trade-weighted US dollar index, up 6 per cent early this year, is now back to where it was at the election. Does this suggest that the Trump trade—radical tax cuts and changes in tax reform, deregulation and infrastructure spending—might be toast?….Read more: