insulating the US from the rest of the world . James Monroe would be proud .
Can globalisation be undone ? In the US , following Trump ’ s victory , industrial stocks surged while tech stocks took a beating . This difference in reaction is illustrative as to how market participants see the future direction of the US economy .
The campaign rhetoric used by Brexiters and Trump in the US often revolved around reviving a bygone era of local manufacturing and production . Frustrated electorates dutifully cast their votes in the hopes of restoring the prosperity of the past .
In the medium to long-term , market overreactions will correct . As in reality , Trump is just another US president with an off-kilter personality ; he ’ s not the first and certainly won ’ t be the last . However , what cannot be doubted is that his presidency will have a profound effect on how global politics and economics function .
Markets are betting , for now , that there will be a raft of economic policies promoting manufacturing in the US . Whether it ’ s even possible for the US , and the UK for that matter , to regain their status as the global manufacturing hubs they once were is a point of massive debate .
Try as he might , Trump is probably not going to succeed in undoing decades of globalisation . North America and most of Europe have surrendered much of their competitive advantage in manufacturing to developing countries , particularly those in Asia .
Don ’ t worry about the UK . Watch the EU The Pound was hammered post-Brexit and has remained weaker as the markets have priced-in uncertainty , but with Trump ’ s win , the UK is starting to look like a rosy place to be .
In the days following the US election , we saw the Pound climb to five-week highs . It ’ s as if the US election put the post-referendum Pound slide into context and investors are now starting to buy into the undervalued currency .
The UK has a lot going for it right now . While the leave campaign was extremely right-wing and inward looking , the current UK government ’ s Prime Minister is a person who voted to remain in the EU . This is vitally important to remember . Theresa May is now setting about achieving the best possible outcome for Britain post-article 50 .
May is an astute politician who has assembled an extremely well-constructed cabinet and it ’ s a near certainty that her government will be pursuing stronger ties across the globe , free from the yoke of the EU ’ s regulations and treaties .
From where I sit , I ’ d have to say that the EU will fall back into the media and market spotlights , only to highlight the big trouble brewing in Europe .
Keeping a shared currency and policies pointing in the right direction is difficult at the best of times . Now , with the nationalist nature of Brexit and the Trump victory , many analysts are expecting EU members to start leaning further right .
Brussels needs to wake up and realise that if the UK ’ s vote was an indicator of wider issues in the global order , Trump ’ s victory is a country-sized warning . If the European parliament makes some serious changes in the next few months , and become less rigid and desperate to remain as it is now , it could well survive for a while longer .
Can the EU pull the fat from the fire ? It is now up to the EU parliament to recognize the incredible disillusionment of the electorates in its member states .
Pollsters are already saying the right wing Marine Le Pen can ’ t win in the upcoming French elections . So far , however , they ’ ve been wrong about Brexit and Trump . Will the third time be the charm ? And what of grumbles growing louder in Italy , Austria and the Netherlands around leaving the EU ?
The EU needs to bend , and bend quickly , before it breaks .
Trump , Brexit and this wider European discontent are not isolated events and trouble in the EU spells trouble for both developed and developing economies .
The Rand : Battered and bruised , as usual Through all of this the Rand is likely to get pummelled . It is still a risk-on currency and no one is keen on taking any on at the moment . Currently , the Rand is probably oversold , but when markets are this frothy it ’ s very hard to tell with certainty .
Having said that , no matter what currency you ’ re assets are in , you need to be patient and wait out the storms . Short-term trading is for the young and the reckless .
There will no doubt be further twists and revelations through the next few months . But keep in mind that currencies , the Rand included , will always revert to their fundamentals in the long term .
So don ’ t throw the Rands out with the bathwater just yet . Any offshore investment decision you make , especially in these volatile times , will require a steady hand on the wheel and a keen eye on the distant horizon . You need to talk to someone who can help you with your offshore investments without getting emotional .
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www . reimag . co . za DEC / JAN 2016 SA Real Estate Investor 55