Live by the Trump rally, die by the Trump rally.
That may be a draconian statement to make about stocks and currencies that climbed in the wake of Trump’s election and now are sliding with the reality of a brand-new administration.
At this writing, one and a half hours into a new trading day and week, the Dow and broader markets are off 100 basis points and more. In Europe, toward the end of the Monday (Jan. 30) session, stocks were also down, with the U.K. off about 80 basis points. The dollar slipped against the yen and has come to a multi-week low against the euro.
The backdrop to all this selling has been, and is, the immigration ban ordered by Trump, which, as Reuters noted, has injected economic uncertainty into the U.S. economic outlook.
As has been widely reported, Trump has suspended travel into the United States from seven countries, ranging from Syria to Iraq and Iran, with an additional four countries in the roster. The new president has cited national security concerns as the reason for the ban, instituted via executive order. In the wake of that order, protests erupted across the country.
The key issue concerning the market seems to be centered on protectionist policies that are designed to restrict trade and the impact of goods, services and, now, people flowing into the U.S. With closed borders, literally, the U.S. would look to advance its export activity, reduce the trade deficit and soften the dollar to make those exports more attractive to foreign buyers. The wrinkle now is what will happen in a possible trade war with China and with the ban/restrictions that now extend to actual humans and the services they provide, not just electronics, handbags and other goods.
The markets do not like uncertainty, and this is rather uncertain. The fact remains that several tech companies have come out, visibly and vocally, in opposition to the immigration policies, which they claim will make it hard to attract tech talent. The trade war has begun in earnest, it seems, and only time will render a verdict on the fallout.