Source : THE AGE NEWS
Economists and market watchers have forecast positive, yet volatile growth for the Australian sharemarket under a second Trump administration. Potential tariffs and an ensuing trade war are among the uncertainties that could pose serious risks to an improving economy.
US President-elect Donald Trump has flagged a broad range of economic policies for his second term, spanning from pro-market tax cuts to new tariffs that could add inflationary pressures to the economy. Global markets will be paying close attention to which of Trump’s policies will be introduced first as traders seek to gain clarity on the direction of the new administration.
A rocky but positive ride is expected for Australian markets under Donald Trump.Credit: Stephen Kiprillis
AMP chief economist Shane Oliver, who described Trump’s policies as “schizophrenic”, said how “those two extremes” are balanced would ultimately determine the path of economic reform.
“Trump has a habit of saying things to create a negotiation impact, but doesn’t always follow through,” Oliver said. “He ultimately wants to see the sharemarket go up, so that leans me to view that those business-friendly views might rise above the populist policies, but it might take a while for us to know that.”
The ASX has already wobbled at the prospect of tariffs. Billions were wiped from the local bourse in November after Trump shared new details for his new duties on Mexico, Canada and China.
Trump progressed his tariff plans on Tuesday, announcing he would create a new external revenue service in the hours after his inauguration tasked with collecting tariffs and other revenue from foreign sources.
Preparation for Donald Trump’s second inauguration at the US Capitol, which will take place in the early hours of Tuesday (Australia time), have started.Credit: Getty Images
Jun Bei Liu, portfolio manager at Tribeca Investment Partners, expected Trump to use the threat of tariffs as a “bargaining chip to drive negotiations he wants”, but she said that if China were to be hit with additional duties, Australia’s mining sector could suffer.
“[Miners] really benefit from global trade,” Liu said. “That friction in trade creates a big problem. Trump wants to drive his policy outcomes using those threats.”
Analysts don’t expect major movement on the ASX in the hours after Trump’s inauguration, since the market has had more than two months to price in changes forecast under the new administration.
HSBC chief economist Paul Bloxham forecast “quite a bit of change” under Trump, but he thought the symbiotic relationship between Australia and China would continue as Chinese authorities worked to restimulate its ailing national economy.
‘The biggest threat would be if Bitcoin goes mainstream, then volatility in it could have more of an impact on other asset markets.’
Shane Oliver, AMP chief economist
“We need them as a source of demand, but they need our product,” Bloxham said. “It’s not just that we rely on China, but China relies on us to some degree as well.”
MPC Markets chief executive Mark Gardner agreed, saying that Australian exporters could be the beneficiaries of Chinese economic woes and “alienating” US foreign policy.
“If the Chinese economy was booming, maybe they’d be accepting of a premium, but they’d be happy to be getting the economy ticking over rather than paying premiums,” Gardner said. “As far as Australia factors in, we might get quite lucky.”
Among the biggest movers in the past two months has been Block Inc, the Jack Dorsey-founded financial services firm that was a key winner of the Bitcoin price surge that followed Trump’s election victory.
Tribeca portfolio manager Jun Bei Liu is among the market analysts bullish about the prospect of Bitcoin in the US and Australian markets.Credit: Dion Georgopoulos
Moomoo market strategist Jessica Amir was bullish on Bitcoin, which she said would become the “big drawcard in the Australian sharemarket” if Trump pursued plans to turn the cryptocurrency into a strategic reserve asset.
“Block will become a top five ASX company if Bitcoin becomes a key reserve asset,” Amir said. “Banks will probably be forced to innovate and come up with a way that they can make money from Bitcoin.”
Liu said there was a chance of a Bitcoin “renaissance” under Trump, which would push banks to consider their own cryptocurrency investment options.
Oliver believed Trump’s preference towards Bitcoin wouldn’t threaten the Australian market.
“The biggest threat would be if Bitcoin goes mainstream, then volatility in it could have more of an impact on other asset markets,” Oliver said. “There’s nothing in there to tell me it would be the currency that Americans use. It could just be a dead end.”
Australia’s miners are forecast to gain from rising commodity prices expected under the Trump administration, though question marks about American action against the oil-rich Iran could complicate projected growth.
Such uncertainty is now expected of Trump, who has spent the best part of four years describing the varied actions he would take if he were to return to the White House. He will now be tasked with implementing the America-first mandate that voters delivered to him in November.
“He’s been in a sweet spot where he can say things and pander to an audience, but the reality is as president, stability is not a word you’d use,” Gardner said. “It won’t be a stable linear path. It will be everything, everywhere, all at once.“
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