As the Trump chaos continues, should we brace for significant market falls?

Mati Greenspan, senior market analyst at eToro, says Yes.

Despite the chaotic nature of his first four months in power, stocks have, for the most part, been resilient to Donald Trump news. But the scandals engulfing the President over of the last few days have started to impact safe haven assets, including gold, the yen, and high-performing government bonds.

As every investor knows, a “flight to safety” typically causes wobbles in the stock market, so the possibility of a “Trump dump” should not be ruled out. We started to see evidence of this today. And the trend is clear on the eToro platform, with very negative sentiment towards global indices. In a presidency defined by its twists and turns, there are a range of scenarios that could materialise.

But preparation is always prudent; investors should consider examining their portfolios and “stress-testing” their accounts to ensure they are ready for any sharp drop in market sentiment. Periods of uncertainty reaffirm the need for investors to prepare for the unexpected – even if immediate action is not yet required.

Jason Hollands, managing director of Tilney Bestinvest, says No.

While an escalation of political turmoil in the US has weighed on the dollar in recent days, so too is improving appetite towards Europe, where anxieties have eased following the French elections.

The reality is that confidence in the Trump administration’s ability to successfully executive its pro-growth programme of aggressive tax cuts, massive infrastructure investment and deregulation has been ebbing away for some time, with the initial failure to garner sufficient support from Republicans for healthcare reform a key wake-up moment.

The “Trump trade” faded months ago and instead, US equity markets have been buoyed by improving economic indicators and a strong reporting season by S&P 500 companies that has little, if anything, to do with the President’s floundering progress in executing his economic agenda. And with US equity indices towering at record levels and valuations looking stretched on numerous metrics, there are plenty of other reasons to be cautious.

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