Donald Trump’s early victory confirmation on November 5 has created shockwaves through global stock markets.
The only market currently thriving is the New York Stock Exchange.
The policies proposed by Trump, which had initially helped stabilize U.S. inflation, are now expected to reignite inflation, potentially derailing the Federal Reserve’s plans for interest rate cuts and strengthening the U.S. dollar. These factors fuel the rise in the New York Stock Exchange and the weakness in global markets.
Moreover, expectations of intensified protectionist policies under Trump’s second term negatively impact global stock markets.
Dramatic Shift in Market Sentiment Over Seven Weeks
CNBC reported a dramatic shift in the performances of global markets and Wall Street over the past seven weeks.
On Monday, Nick Colas, co-founder of DataTrek Research, noted in his nightly analysis that global markets outside the U.S. have nearly erased their entire year-to-date gains in just seven weeks. He said the international stock market, which had been on a strong upward trend, has experienced a dramatic downturn.
Colas pointed out that the strong U.S. dollar and various factors have contributed to the difficulties faced by global stock markets.
He asserted that no major stock market outside the U.S. has a safe haven from selling pressures for the remainder of the fourth quarter.
World Markets Stall While Wall Street Surges
The iShares MSCI ACWI ex US ETF, which tracks global stocks excluding U.S. equities, clearly illustrates the diverging trends between international markets and the New York Stock Exchange. This ETF comprises stocks from the MSCI ACWI, excluding U.S. stocks, including major companies like Taiwan’s TSMC, Denmark’s Novo Nordisk (pioneer of GLP-1 diet drugs), and China’s internet giant Tencent.
Before the election, the ACWX ETF had been performing reasonably well, showing an 8.6% increase as of November 5.
However, following the election results on November 6, the ETF’s value dropped by 3.03%.
Overall, its year-to-date gains have narrowed to around 5%.
In contrast, the S&P 500, a key New York Stock Exchange index, has maintained its bullish upward trend.
The S&P 500 surged 21.2% by the day of the U.S. election and climbed an additional 1.9% by Monday. Despite a 2.1% drop last week amid the absence of the Trump rally, it continues to show strong overall performance.
The S&P 500 has skyrocketed by 24% this year.
Divergence Expected to Continue
While global markets appear more attractive for buyers with lower performance this year, the outlook remains uncertain.
If Trump’s second administration brings stronger U.S. protectionist policies and his “America First” agenda hampers other countries’ exports to the U.S., global markets could lose their upward momentum.
Furthermore, Trump’s tax cuts and protectionist measures could exacerbate U.S. fiscal deficits and inflation, raising U.S. interest rates and attracting global capital back to the U.S.
Colas predicts that the New York Stock Exchange is likely to continue outperforming global markets until Trump’s second-term policies are clearly defined.
