Investors seem to think that the newly elected American President, Donald Trump will prove beneficial to the shipping industry, as the latest shipping stocks surge has shown. On the other hand, it could just be a blip of the markets and normal service will be resumed as soon as more information regarding policies emerge. Still, as Allied Shipbroking pointed out in its latest weekly report, it looks as though the market started to have severe mood swings as to what a Trump presidency would mean to U.S. and more crucially global markets.
George Lazaridis Head of Market Research & Asset Valuations with Allied noted that “last Wednesday started off in line with what most had anticipated with the U.S. dollar weakening against most major currencies and most commodities witnessing a drop in price with the exception of gold which as always is seen as the typical “safe harbor”. This was short lived however with both the U.S dollar and commodities quick to rebound and then continue on an upward course up until the time of writing, which was remarkable to say the least. It seems as though Trump’s talk over huge infrastructure developments and investing to be made under his presidency caused most to see a major increase in demand for most “heavy industry” commodities”.
Lazaridis went on to comment though that “things however are never so clear cut as the subsequent volatility showed in late trading hours on Friday and early trading hours today. Many traders came to the quick realization that even if the U.S. economy undertakes a massive and successful investment in infrastructure that could boost construction and demand for commodities, this could be as easily overturned by Trump’s other campaign promises regarding trade agreements. His hostility towards Chinese trade and his strong promise to erect massive trade barriers with China in the form of high rate tariffs on imports would likely have a domino effect. China has already shown difficulties over the past year and a half. With China being the world’s largest importer of raw commodities, any setbacks in its economy are likely to have an overall negative effect on global commodities which will be a considerable multiple of any positive effect the U.S. could have in this regard”.
According to Allied’s analyst, “however with all this being highly theoretical at this point and with the large majority of Trump’s policies remaining in the realm of the unknown, no one really knows which way things could go. So for now it seems to be a great playing field for market speculators, taking up positions which as they see it could potentially reap them great rewards if their scenarios pan out (or great losses if they don’t). Nevertheless things seem to be going in a healthy direction for now from the commodities perspective giving a slightly bigger edge to a scenario of an overall boosted global economy moving forward. Japan’s recently announced latest GDP figures surpassed by a big margin all analysts’ expectations and although this has been mainly attributed to a healthy boost from exports, it indicates their reliance on close cooperation with its trade partners and their respective economic growth trajectory. This “free trade” most countries depend is even more the case for emerging economies which have been the ones that have been supporting global growth since 2008. Their extraordinary growth figures are not isolated within these countries but also reciprocate increased demand for products and more importantly services from the more developed economies. Japan’s growth in exports has mainly been fueled by demand from China which for many years now has served as a major growth engine for Asia and consumes all sorts of imports from other countries worldwide. A step towards Trump’s campaign dream of isolated nations would benefit no-one in the long run, however as to what Trump’s dream really is no-one seems to know. It’s anyone’s guess right now which way things will go”, Lazaridis concluded.