Trump earthquake causes only minor tremors on the markets

There may have been a political earthquake in the United States overnight but, so far, the expected earthquake in financial markets that was expected to follow has not materialised.

Yes, there were falls in the main Asian stock indices, notably in the Nikkei, as traders and investors in that part of the world gave a knee jerk ration to Donald Trump's election victory.

But the markets here in Europe have largely taken the news in their stride.

The US dollar has largely regained the ground it lost as the shock news from swing states like Ohio and Florida came in and the FTSE 100, at one point, even moved into positive territory.

But what does it all mean for savers and investors and for people's money more widely?

Well, there is likely to be some short term volatility, even though this has not been too severe in Europe.

Traders say that this is because many have learned from their experience in the aftermath of the Brexit vote - which, like the Trump victory, had not been predicted by opinion pollsters.

This time, while a Clinton victory was being "priced in", plenty of professional investors had bought insurance in the derivatives market to protect themselves against any unpleasant surprises.

And, frankly, for people investing in the stock market for the long term, via their pensions, their ISAs or their life insurance policies, should carry on doing so.

As Tom Stevenson, the investment director at Fidelity International, observes: "The reality is that stock markets are influenced by economic growth, innovation and the growth in corporate profits over time.

"Irrespective of who sits in the White House, people continue to go to work, businesses continue to pursue profits.

"The world goes on...history suggests that big market events in time look like blips in a long term upward progression.

"Look at a 30-year chart and the 1987 crash is barely noticeable."

So savers should probably carry on saving.

More confusing is the outlook for borrowers.

Mr Trump's policies are widely expected to be inflationary and that may oblige the US Federal Reserve to raise interest rates earlier than it might otherwise have wanted to.

Where the Fed leads, others follow, so it is perfectly possible that, all other things being equal, Mr Trump's election could well lead to a normalisation of interest rates around the world from their current ultra-low levels.

On the other hand, should Mr Trump persevere with the policies that he outlined during the election campaign, such as hoisting tariffs and trade barriers with emerging market economies, that would be very bad for global growth, potentially obliging central banks elsewhere to keep interest rates lower for longer.

Borrowers will have to make their judgments accordingly.

If the Fed is obliged to raise rates earlier than expected, that will clearly be positive for the dollar.

Weighed against that, though, is the risk that Mr Trump's policies are expansionary as he has indicated with consequences for the US national debt.

If investors from China, for example, fear that Mr Trump is debauching the currency, they will not hesitate to sell the billions of dollars worth of US government bonds that they have accumulated over the last decade.

If Mr Trump does everything he has threatened to, the US dollar's status as a global reserve currency will be challenged like never before.

It could mean that all those Britons now mourning their seasonal shopping trips to New York, due to the pound's collapse after Brexit, could be back in business before long.

And, of course, there's always the prospect of a trip to Mexico.

The collapse in its currency against the dollar suggests it is going to be a much cheaper location in future.

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