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The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.
It’s a cliché no doubt but the newsletter headline is apt for Trump’s victory. Of course, if this was the reason, then how come pollsters got their predictions all wrong, you may wonder. But it appears from India to the US, pollsters are getting their predictions wrong. The phrase ‘It’s the economy, stupid’ is attributed to Bill Caville, Bill Clinton’s advisor, as a key factor in deciding electoral battles. While the US economy is in good shape, the masses are not feeling it. As Manas Chakravarty pointed out in his incisive analysis of the poll outcome in yesterday’s Pro Panorama, “The Trump vote is a protest by those left behind in this new gilded age”.
In the day after the polls, the Biden administration’s track record on the economy, mainly inflation, is being pointed to as their main undoing. This FT analysis (free to read for Pro subscribers) delves into the reasons why the Democrat leadership failed to get their message across, handing Trump an ‘emphatic’ victory that will see him become the first Republican in 20 years to win the nationwide popular vote. The economy makes an appearance, but also about how they may have misread the shift to the right. Getting back in the reckoning would need a shift to the centre, as the article points out.
Investors in US markets continue to celebrate the victory with key indices moving up sharply yesterday, and futures’ markets indicate that it’s likely to continue today. However, India’s markets have given up nearly all of yesterday’s spectacular gains today (at noon), with large-caps leading the fall. The rupee has fallen against the dollar and oil prices have firmed up, both points of concern for the economy if they continue. Later tonight, the US Fed’s decision on interest rates will be known, with the decision and commentary giving additional pointers to investors.
This second FT article (also free to read for Pro subscribers) looks at what Trump 2.0 means for central banks, saying it sets a series of bear traps for them to skirt over in the coming weeks and months. Their decisions are being taken on the basis of economic models that pencil in current policies in force. If Trump throws or threatens to throw them out of the window, then they may feel the need to pause to get a better idea of what lies ahead. That sort of uncertainty may not be good news for markets.
Mapping daily market movements to Trump’s victory does not make sense. However, we did evaluate the impact over a longer term horizon. Yesterday, you may have read our research team’s take on the election outcome. The nub of their argument was this: “While the correction from the top has made the Nifty valuation at 19.4x forward earnings a tad cheaper than the long-term average of 20.4x, there are headwinds galore. Should the macro indicators turn incrementally adverse, there could be a swift downward revision in the earnings estimates especially of the domestic-themed companies.” Do read to know what investors should do, if you missed it yesterday.
My colleague Vatsala Kamat also spoke to S Krishnakumar of Lion Hill Capital, an experienced fund manager, who has taken a longer term post-election view of the economy and markets from multiple viewpoints. One of them is that the US Fed does face a challenge on its moves till the new administration’s fiscal plans become clear.
Today, we continued our comprehensive coverage for Pro subscribers. Leading investor and fund manager Shyam Sekhar wrote about markets having a steep wall of fear to climb pointing to the various areas where we need clarity before we can say for sure if Indian equities will benefit or not. In his words, “Overall, our markets will need to patiently weigh the pros and cons of policy making, geopolitics, positioning shifts, tariffs and global macros as they become clearer.”
Trump inherits a presidency very different from the one that he handed to Biden, on the geopolitical front. “There are active wars in Europe and Asia. There’s rising Chinese belligerence in the South China Sea and the Taiwan Straits. There’s now incontrovertible evidence that the North Korean dictator, Kim Jong Un, about whom Trump famously said, “We fell in love,” is directly involved in the Russia-Ukraine war. There are the trade wars stemming from US-China rivalry — a high stakes global power competition across both economics and geopolitics,” writes Vivek Kelkar who provides an outline on all these crucial conflicts that Trump will need to devote attention to when he enters the Oval Office.
India and the US have been maintaining friendlier ties under successive Modi regimes. Trump and Modi themselves are on very good terms, which augurs well for trade ties as well. How will India manage this bonhomie on one side even as on the other, Trump raises the volume on the debate over higher tariffs to help US producers? Abhijit Dutta delves into this crucial issue for answers. Prosenjit Datta has a more circumspect view on what the impact on the Indian economy could be, writing that we need to wait for the rhetoric to change to reality in the form of policies, at which point the impact can be gauged.
Maybe, the realisation that it’s a tad premature for Indian investors to celebrate Trump’s victory is what markets have woken up to today.
Investing insights from our research team
Niva Bupa Health Insurance IPO: Should investors subscribe?
Berger Paints Q2: Sluggish consumer demand a challenge
Jindal Steel and Power: Decent quarter in a challenging environment
Should Indian investors celebrate Trump 2.0?
What else are we reading?
IT, pharma can gain from Trump presidency despite higher trade barriers
Safari Retreats: Apex court's decision on GST tax credits brings relief to construction sector
Trump 2.0 presents an opportunity for India to deepen defence ties
Markets
Market volatility: The sectors that experts are advising investors to look at
Tech and Startups
Under Trump 2.0, possible corporate tax cuts could boost IT demand
Technical Picks: SAIL, Bank of Baroda, Tata Motors, Bajaj Finance
Ravi Ananthanarayanan
Moneycontrol Pro
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