Ivan Fallon: As Trump fades, so too do investors’ fears of a coming calamity

If Trump does lose on Tuesday night, all the market jitters will be forgotten. But it is worth marking for a moment what might have been.

Analysts have given solemn warning after solemn warning about dire consequences should a Donald Trump vistory ensue in the US election this week. Mandel Ngan / AFP

Before he became the British foreign secretary, Boris Johnson likened Hillary Clinton to a “sadistic nurse in a mental hospital”. How, one wonders, will he recover from that if, when the next time he meets her, she will be, as now seems inevitable, the 45th president of the United States?

Boris is not the only one who will have to perform a hasty word-eating exercise after a week when a surging Donald Trump had the world’s markets seriously rattled before the dramatic 11th-hour intervention by the FBI late on Sunday.

The weekend newspapers in the UK were full of dire predictions of what a Trump victory, which suddenly looked a serious possibility late on Friday, would do for markets. “The Trump Dump” was the headline in The Sunday Times, which quoted fund managers expecting “somewhere between 5 per cent and 10 per cent to be wiped off global stock markets amid fears of trade wars and the risk of unintended consequences of Trump policies”.

The Sunday Telegraph warned of markets being “plunged into turmoil”, with long-term damage to the world’s biggest eco­nomy if the Republican candidate snatched victory – which, as they sat down to write their columns, they clearly thought was a likely result.

Monday’s Times – also written before the FBI announcement that it had found nothing criminal in Mrs Clinton’s email practices – commented that a Trump win would “knock trillions off share prices” and investors should brace themselves for huge swings in share prices and currency rates in the early hours of Wednesday. There were many other dire forecasts in similar vein, the common theme being that Trump could do a Brexit and actually win.

He might still do it, of course, in which case it will be people like me who look silly. But I don’t think so. And nor do the markets, which started the week in cracking form on Monday morning, beginning with a surge in the Far East that spread across the globe. It’s amazing what difference a weekend – or an FBI statement – can make on market sentiment. On Friday, it was all doom and gloom. By yesterday morning, investors had decided that last week’s Trump surge had peaked and Hillary will be back in the White House in January.

If Trump does lose tonight, all the market jitters will be forgotten. But it is worth marking for a moment what might have been. Wall Street’s “fear index”, a measure of option prices, climbed on Friday to its highest level since the Brexit vote and the gold price surged to more than US$1,300 an ounce, its highest price for some time. Agustin Carstens, Mexico’s central bank chief, said a Trump win would be a “hurricane” for his country, which exports more than 80 per cent of its goods north of the border, and the international institutions in Brussels were reported to be dreading the implications of a Trump presidency. Analysts at Barclays said that a Trump win would presage “a violent flight” from stock markets and Citi believed it would cause the S&P 500 to plummet, taking every other index with it.

And I could go on: solemn warning after solemn warning from so-called experts who are supposed to have their fingers on the pulse but in fact are as fallible as the rest of us. Most of them had become convinced that Armageddon, in the shape of a Trump victory, was on the cards. Now few, if any, of them believe it.

It’s interesting that none of the forecasters reckoned a Trump victory would be good for the markets or the global economy. But they said the same about a Brexit vote too. The FTSE 100 ini­tially fell but stormed back to hit all-time highs in October.

Like Brexit, the US election campaign seems to have gone on forever. The big difference is that a Hillary victory would generally signal the continuation of most of Barack Obama’s policies. The Brexit process, on the other hand, has entered another crisis with the decision by the Law Lords to insist on a parliamentary vote before triggering Article 50. That one will play and play.

Ivan Fallon is a former business editor of The Sunday Times

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