The best bits of election reaction that affect you... Tony Alexander suggests fixing for three years, downplays impact of Trump victory on NZ, the yuan falls to a six-year low, Turnbull talks TPP with Trump, Facebook's role in outcome debated, and more

The best bits of election reaction that affect you... Tony Alexander suggests fixing for three years, downplays impact of Trump victory on NZ, the yuan falls to a six-year low, Turnbull talks TPP with Trump, Facebook's role in outcome debated, and more
Cartoons drawn by interest.co.nz's in-house graphic designer Jacky Carpenter

Donald Trump has been elected President of the United States. What now?

Here’s a running commentary of how financial markets, commentators, movers and shakers are reacting, and how it affects you.

4.25pm

What should mortgage holders be doing post-election? BNZ chief economist Tony Alexander suggests fixing for three years. He says: 

"Some migration boost may ensue to NZ, but it is important to look beyond the initial dummyspitting by those who opposed Mr Trump and see how things settle down.

"There has already been some extra upward movement in US medium to long-term interest rates overnight in anticipation of larger budget deficits and higher inflation and this adds to the already growing pressure for fixed home lending rates to rise here.

"Big movements up are unlikely, but perhaps this time post-GFC we can have very high confidence that we have finally gone past the low point for the fixed rate cycle. I’d fix three years now."

Alexander notes market "recovery was swift as attention turned to a likely economic stimulus from higher infrastructure spending, possible absence of the previously expected tightening of US monetary policy next month, likely tax cuts, and reduced burdens upon sectors such as health and banking."

He has downplayed the impact of a Trump victory on the New Zealand economy, saying: "My personal view remains that the Kiwi dollar has support from a wide range of factors, not the least being the strong state of the economy plus the new element of recovering international dairy prices.

"Any weakness attributable to the uncertainty surrounding the President-elect may already have been and gone."

4.05pm

Social media has played a huge role in this election. Bloomberg explores the extent to which it helped Trump win:

America just endured its first presidential election in which the majority of the electorate got its news from social media. And the outcome is already prompting soul searching by the companies that shaped it.

Facebook Inc. will have to contend with mounting dissatisfaction over its role as the most widely used news filter in history. Forty-four percent of American adults get their media through the site, many consuming news from partisan sources with which they agree.

The proliferation of fake news on Facebook has also been a problem: false stories about the Clinton family committing murder and Huma Abedin being a terrorist flew fast and furious despite refutations from responsible news organizations. Those stories shaped public opinion, said Ed Wasserman, the dean of the University of California, Berkeley Graduate School of Journalism.

“This is a landmark,” he said. “Trump was able to get his message out in a way that was vastly influential without undergoing the usual kinds of quality checks that we associate with reaching mass public. You had a whole set of media having influence without really having authority. And the media that spoke with authority, the authority that comes after careful fact checking, didn’t really have the influence.”

3.45pm

The Chinese yuan has fallen to a six-year low against the USD.

The onshore yuan opened trade at 6.798 per dollar, while the People's Bank of China set a weaker official midpoint for the fifth consecutive day at 6.789.

Trump has labelled China a currency manipulator, and threatened to impose a 45% punitive tariff rate on all Chinese imports.

ASB's chief economist Nick Tuffley says this could see China’s exports to the US could fall by as much as 80%.

"Given 4.6% of China’s GDP is exports to the US economy, we anticipate China’s real GDP growth will slow from 6.5% to 5.5% as US tariffs imposed on China are offset by Chinese domestic stimulus measures," he says.

"The slowing in China’s economy would have some flow-on economic implications to the rest of Asia, including NZ and Australia."

3.15pm

The Sydney Morning Herald reports:

Everybody was caught with their pants down when it came to Donald Trump's unexpected election victory, including the bookies, which are paying dearly for their collective misjudgement.

Sportsbet reports it has paid out $11 million to 25,000 punters who backed Trump, including one punter who picked up $10,100 from a $100 bet on Trump in 2014.

The company, owned by Irish bookmaker Paddy Power/Betfair, hasn't said how much was bet on a Hillary Clinton victory, but twice as many bets were made on Trump, suggesting the losses across the industry will be substantial. 

2.55pm

Australian Prime Minister Malcolm Turnbull has wasted no time pressing Trump over issues core to Australia's interests, the Australian Financial Review reports.

During a 15-minute phone call to congratulate Trump on his victory, Turnbull urged him to rethink his opposition to the TPP. He also raised his concerns over the US's military presence in Asia-Pacific.

2.40pm

ASB chief economist Nick Tuffley:

At face value Donald Trump’s policies are inflationary.  Lower taxes and higher government spending are stimulatory. Consequently, there is the prospect of stronger US growth and an earlier lift in inflation pressures. Furthermore, the proposed cut in the company tax rate would improve the after-tax return of equities, generating larger capital inflows into the US economy. US corporates would repatriate profits that are now subject to less tax into the US economy. This mix of policies points to higher US interest rates, higher US equity prices and a stronger USD.

The implications of a Trump Presidency on NZ are mixed, and depend much on what policy shifts dominate NZ’s export demand. The big uncertainty is to what extent any trade protectionism undoes the impact of a US fiscal boost on NZ. 

The mix of NZ monetary conditions is likely to shift in favour of a weaker than otherwise NZD, counterbalanced by higher term interest rates via higher US interest rates. The NZD impact may overall win out, but at this stage the net effect does not look like it will be dramatic.

The RBNZ has a lot of time up its sleeve to assess the likely NZ impact of the Trump presidency. Even the next Monetary Policy Statement, on February 9, may be too soon to for the RBNZ to incorporate any economic changes given Donald Trump’s inauguration is less than 3 weeks prior.

For the time being, we see the implications for NZ monetary policy as mixed.  We continue to expect the RBNZ to keep the OCR on hold at 1.75%. The risks are slightly skewed to the downside, with the incoming President Trump one further uncertainty to respond to.

2.20pm

Standard & Poors has affirmed the US' investment-grade 'AA+/A-1+' sovereign rating further to Trump being elected. It says:

"We assume the longstanding institutional strengths and robust checks and balances of the U.S. will support policy execution in a Trump administration, despite the president-elect's lack of experience in public office, which raises uncertainty on policy proposals.

"The credit strengths of the U.S. include its diversified and resilient economy, extensive economic policy flexibility, and unique status as the issuer of the world's leading reserve currency. However, high general government debt and now increased uncertainty over its trajectory constrain the ratings."

2.05pm

1.20pm

Will Trump actually have the power to start a nuclear war? Yes and no, says New Zealand-based security expert, Paul Buchanan on Radio New Zealand.

“The command of the nuclear arsenal, the order to fire, is done by the president alone, there are no checks or balances on him once he makes that choice. He doesn’t have to consult with Congress, he certainly doesn’t have to consult with the judiciary,” Buchanan says.

Yet he notes the president will have to operate under the weight of US foreign and domestic policy and will be closely vetted by military officials.

“And then there’s the check of ultimate resort.”

Buchanan says twice before, when Nixon was in the middle of his Watergate troubles, and during the time that Reagan was suffering from Alzheimer’s, the military stopped them from pulling the trigger.

“I would imagine if Trump starts operating in a very erratic way, they would do the same thing to him,” he says.

12.55pm

Here's a map of what the election result may have looked like if only millennials voted, according to polling firm, SurveyMonkey.

Yes, we have all learnt a lesson about the accuracy of polls in this election, but even with a sizeable margin of error, the results are telling.

You can hone in on other demographics on SurveyMonkey's website. See this page for its methodology.  

12.40pm

Xero CEO Rod Drury is keen to recruit staff from the States. Here's a snippet from a letter he sent his staff this morning and published on Twitter:

 

12.30pm

Prime Minister John Key on Radio New Zealand about what will happen to the Trans-Pacific Parternship. 

"It's definitely not going anywhere in a hurry...

"We've had a great and growing and strong economy - one of the strongest economies in the developed world - without TPP.

"It would have been nice to have, but we're not going to have it in the short term...

"But does that mean there will never be an attempt to re-negotiate it? No, because President Trump will get the same advice from the State Department, from the Pentagon, from the Treasury that President Obama got, which is that you need to have influence and you need to have presence in Asia and to do that free trade locking you in there is the way to do it."

12.25pm

Speaking at a press conference this morning, Reserve Bank Governor Graeme Wheeler said the decision to cut the Official Cash Rate had been reconsidered today in light of the US election result. The RBNZ "reaffirmed it was the right one".

12.15pm

To begin with, this from BNZ markets expert, Nigel Collins:

The US will trumpet in a new President in January, and as the sun rises on the day after this apocalyptic election result there is a degree of calm after some extreme intra-session volatility.

The end result is that contrary to pre-election forecasts the Trump victory has seen the USD and most risk assets actually stronger.

Many analysts have adopted the view that Trump’s policies are likely pro-growth and inflation, and that he will likely instal 2 more hawkish Fed Governors in next year’s rotation.

- Markets initially completely priced out the chances of December fed rate hike, but that has been reversed and market pricing once again indicates an 82% probability of a hike.

- US 10 yr bond yields have swung a massive 37 bp range, and are closing near the highs around 2.05%

- Equity futures were initially pounded, but US stocks have finished up around 1.5% on the day.

- The USD is stronger, responding to the hawkish rates markets, with USD/JPY swinging a 5% range, but settling near 106 – the highest level in months.

Our currency was slow to react to a Trump victory, but has ultimately opened over a cent lower but not nearly as low as we thought a Trump victory would dictate – following more the USD strengthening trend, rather than the anticipated risk off forces.

It will take a while for markets to get this one right, as who knows which of the many Trump threats he will actually follow through on – and what the ultimate rebalanced impact will be on NZD and asset prices.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

20 Comments

LOL ............continuosly LOLLING ............ so the Trump poll predictions were based on something called survey monkey ?

WTF?

I have had spam sent to me by these survey-monkey people before , I just delete it

I have no idea who these survey monkey people are or what they do , I just know that monkeys are horrible little creatures that are not to be trusted .

Everybody was caught with their pants down when it came to Donald Trump's unexpected election victory

Apart from, obviously, all those people who bet on Trump winning so that ....

losses across the industry will be substantial.

I'm guessing the definition of "everybody" is restricted to pollsters, pundits, and those who weren't paying attention through the primaries...

Thank you for pointing this out , during the Primaries Trump got more votes that any Republican Presidential candidate in History .

If that was not a clue , then what more did they need ?

And the pollsters relied on some newfangled thing called SURVEYMONKEY which I thought was a Malaysian Porn site .........

But I am a Baby boomer , so what do I know ?

Survey Monkey is legit and has been around for years.The chart shows old voters are Trumpist, young are not.To a very marked degree.

It's amazing how quickly we got to the 'acceptance' stage of a Trump Presidency - less than 24 hours.

The end result is that contrary to pre-election forecasts the Trump victory has seen the USD and most risk assets actually stronger.

Grief, anger, denial.... acceptance
But the NZX is still down 2%, why are we special? ? overestimating the distant ramifications of "Trumpocalypse"

No , no the NZX is way overpriced and way over time for a correction , nothing to do with Trump

The NZX has gone up faster and more than Auckland house prices in the past 24 months, and its not sustainable .

Some PE RATIOS are 75 and some are at 100 , which suggests it could take 100 years to get your investment back based on current earnings . I can assure you you will be dead before you get your money back if you are a long term investor

If you bought a small business you would expect to get your investment back in 2 to 5 years , not 100 years .

The NZX is out of touch with reality and a correction is overdue .

I believe the NZX50 average PE is currently around 18, I'd be interested to know what companies you have in mind for the triple figure PE ratios? I can guarantee they'll be companies where significant growth in earnings is expected, or where earnings are being reinvested in growth which pushes up the ratio in anticipation of greater future returns.

Remember that average PE ratio includes large companies like Xero who don't currently have earnings (again, because they're too busy buying future revenue at the moment). You don't have to invest in or even understand the rationale behind these companies, but to call an entire market overpriced because of their presence is difficult to justify.

The NZX Holding Company I think has a PE of 75

That's an interesting one, pe on the nzx site is 75, but it's in the 20s on Google finance and four traders. Not got time to look into the discrepancy now, but the gross dividend yield of 8 percent or so tells me there's something funny going on, same kind of deal as the power cos where pe is high as the cash flow is much higher than the profit perhaps?

I understand all of that , I am up to my eyeballs on the NZX , but if you take Xero , you ( and I ) have not idea what is going to come from Google Cloud Accounting which could be its Nokia moment ... remember Nokia ? or Kodak ?

So why did it fall 3.5% in 1 hr when the polls looked shaky for the Dems, if Trump had nothing to do with the fall???
Get the feeling Boatman is a classic Trumpophile

Give it six months and the QE will power ahead in USA and Europe, interest rates will come down and NZ will head towards zero just like many other countries.

Key is naive and still living in la la obama land........Trump may consider TPPA? what cloud are you on John boy, he thinks he can pull his spin on trump

A few musings. Trying to look for the positives in Trumps win. When you look back at the past few decades, the political and economic systems have only worked in favour of the very wealthy, so despite my very significant doubts about Trump may be he will be a vector to mess up the status quo in which we are mired. My experience has been that when faced with a problem that seems intractable, it is often my paradigm that is the problem. Sometimes the best thing to do is push the situation till it breaks and get a totally different perspective. It may work as long as he doesn't push us into WW3 or some other disaster with irreversible consequences; global climate change for instance. Darn. There I go back to negative.

"push us to WW3" you do realise we are talking about Trump not Hillary, now she would have been a sure WW3 bet. And to your other passing comment about climate change, I can see it now, they will give him 6-12 months in office before throwing him under the bus as being sole responsible for climate change - never mind the past 150 years of human history.. no no.. definitely the last 6 months of Trump at the wheel.

I concur with Chris-M again. I believe we all need to not get caught up in the pre-election hype that has spilled over to post election Trump and that that drama is the new norm. The NZ media will whip up a storm as in TV1 last night hyperbole that a great divide has arisen over night in the USA ransacking of 25 states etc-that's just cheap unintelligent reporting and does not contribute or show any respect to the general public, whom are intelligent and don't need that cheap dribble.
Whew! now I've said that if history has taught me one thing that it is sometimes we do need upheavals before real change occurs -yep there is the unknown, what impact will change have on us in NZ. Remember 1987, 1997 in UK 2007 in NZ economic crashes we came through those and NZ adapted to the new economic an political climate.I too do not want WWIII but sometimes sea changes come and we need to be level headed about that and strategise how best we will adapt and prosper.

The elites didn't see it coming - saw themselves as invincible

Said it two weeks before the election - dunno about decades - try centuries

The political elites have had a fair suck of the sauce bottle for a couple of hundred years and have done a pretty poor job of running things to end up producing a GFC

Read the full comment - 30 October 2016
http://www.interest.co.nz/opinion/84291/donald-trumps-implosion-does-not...

I see that the losers are now blaming Facebook and Twitter for causing Trump to win ............

The should stop looking for scapegoats ( or escaped goats) , and focus instead on why they did not recognize that Mr Average American is really pissed off with the way things are in the USA

I've not seen any anti-Trumpers neglecting to recognise how pissed off Mr or Ms Average American are. But I have noticed that the anti-Trumpers have a different view about how to respond to and solve the discontent. And i've noticed Mr or Ms Average American (and Mr or Mr Average Brit), feeling pretty patronised by the left's interpretation of their discontent too.