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So it looks like Donald Trump may land the Republican nomination. You’re either extremely happy, petrified or dumbstruck that the guy who hosted The Apprentice is one step closer to leading the most powerful nation on earth.

If you’re a trader or market strategist, you’re probably in the process of figuring out what a Trump presidency means for the global financial markets. While nobody knows for sure how the Don will impact finance, we have a few ideas. Read on to find out what could happen with Donald Trump in the White House.

A Stronger Dollar

A Trump presidency will likely support the US dollar over the medium-term. While his rhetoric alone could be enough to support the greenback as the world’s preferred haven currency, the Don has made it abundantly clear that low interest rates are bad for savers. This is one of the few policy positions we’ve been able to glean out of the Trump candidacy (although he later contradicted himself by saying that raising rates would be bad for the US economy).

Trump has also promised to overhaul the tax code, including a one-time repatriation of corporate profits held overseas at a much lower tax rate. The last time the US government provided repatriation amnesty was in 2005, and the dollar rose 5% in the process, interrupting a seven-year downtrend for the greenback.[1]

Higher interest rates on US bonds

Mr. Trump has made it expressly clear that he would reduce taxes once elected President. According to analysts, Trump’s aggressive tax cuts could lead to massive growth in GDP, higher wages and more plentiful jobs. However, those tax cuts would reduce federal revenues by over $10 trillion, leading to a massive deficit that could lead creditors to demand higher interest rates on US bonds. It’s unclear how the market would respond to this. “Spooked” is probably one word to describe it.[2]

Possibly lower purchasing power

If a stronger dollar wasn’t hard enough on America’s terms of trade, Trump has made it clear he is prepared to play hardball when it comes to international trade deals. This includes imposing large tariffs on imports that Americans rely on everyday – imports that the US economy cannot replace with domestic production, at least not affordably. As a result, many of the cheap products Americans take for granted could get a whole lot more expensive. According to analysts, tariffs also lead to retaliation, which can also impact US exports.

The one saving grace on the trade front is Trump’s promise to “win more” deals. If he succeeds in negotiations, he might actually strengthen America’s trade position.[3]

Volatile Stock Markets

It’s difficult to predict how the equity markets would respond to a Trump presidency, but a stronger dollar certainly won’t help US corporations already struggling with weak international demand. Wall Street is in the process of recording its fourth consecutive quarter of earnings decline. This painful earnings recession has been caused in large part by a strong US dollar. Surprisingly, equity markets have been resilient to dismal earnings. At this stage, however, it’s difficult to imagine how the major stock markets will continue rising, given the current market fundamentals. It’s scary to think that stock markets recently approached all-time highs at a time when the US economy slowed to a near standstill.

Investors should also be weary of health care stocks, which could be thrown into a tailspin should Mr. Trump repeal the Affordable Care Act, something he’s promised to do several times already.[4]

Then again, others are bullish about a Trump presidency. They believe that he will improve America’s trade position, strengthen domestic business conditions and ultimately lead to a more prosperous nation.

“Markets always worry when uncertainty is a factor, and it is unclear which policies Trump would execute if elected,” said John Stoltzfus of Oppenheimer, as quoted by CNBC. “However, I’d expect him to enact policies that reflect his ability to successfully negotiate with people. He relies on good relationships with politicians and Wall Street, and I don’t expect that to change.”[5]

Additionally, pro-Trump pundits argue that huge corporate tax cuts would bolster profitability of American companies, thereby supporting stocks.

So… What are the Odds of a Trump Presidency?

It’s pretty much a foregone conclusion now – Donald Trump is the likely Republican presidential nominee. With Ted Cruz and John Kasich officially dropping out of the race,[6] Trump is only a few hundred delegates shy of officially clinching the nomination.

According to PredictIt, a New Zealand-based binary options prediction market, Trump’s chances of winning the presidency are around 40%, up from 34%.[7] The organization is giving the nod to Hillary Clinton as the likely winner. She recently bolstered her lead against social democratic candidate Bernie Sanders, making her the likely Democratic candidate to run against Trump in November. Real Clear Politics also gives the edge to Clinton, based on an average of six polls.[8]

Sit tight, folks. It’s going to be a bumpy seven months where anything could happen.

[1] Joseph Adinolfi (May 5, 2016). “A Trump presidency could cause the dollar to rise again.” MarketWatch.

[2] Emily Stewart (May 4, 2016). “If Donald Trump Was President, Here’s What Would Happen to the U.S. Economy.” The Street.

[3] Suzanne Woolley (May 6, 2016). “What a President Trump Might Mean for Your Personal Finances.” Bloomberg.

[4] Suzanne Woolley (May 6, 2016). “What a President Trump Might Mean for Your Personal Finances.

[5] Brian Price (May 7, 2016). “A Donald Trump presidency makes some bulls run wild.” CNBC.

[6] Betsy Klein (May 6, 2016). “How Ted Cruz was out-outsidered by Donald Trump.” CNN.

[7] Anjali Athavaley (May 6, 2016). “Clinton more likely to win U.S. presidency than Trump: PredictIt.” Reuters.

[8] Real Clear Politics. General Elections: Trump vs. Clinton.

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