US stock markets are closed on Friday, 14 April as the worldwide population celebrates Good Friday. This will give investors a few days to take a breather and come back renewed and refreshed next week. Many investors will have unwound their short term positions ahead of the long weekend because normally we never know what might happen but especially with Donald Trump in charge. So, what can we expect when investors return next week?
Military action
Donald Trump has wasted no time ordering military action in Syria, Afghanistan and he is apparently on the verge of attacking North Korea. The North Korea story is perhaps a little far-fetched at this stage of his presidency but there is no doubt that North Korea has been a thorn in the side of many American presidents. Yesterday we saw the US drop the “mother of all bombs” on Afghanistan wiping out an array of ISIS secret tunnels. While the fight against terrorism continues there is concern that Afghanistan may have been used as some kind of testbed for the launch of the US “mother bomb” – the largest non-nuclear bomb ever to have been used.
Increasing the risk factor
Any tensions around the world, and there are also tensions with Russia, will increase the risk factor associated with investment. As a consequence many investors will be looking for a greater return for the increased level of risk. Whether we see markets take a breather and consolidate at lower levels remains to be seen but military action on this kind of scale has not been seen for many years and Donald Trump seems determined to fight every cause.
The reality is that many investors have been looking for a reason to take profits and ongoing military action could offer this reason on a plate. When you bear in mind how strong the US markets have been since Donald Trump came to office can you really blame any investor for banking a profit?
Is Donald Trump a loose cannon or strong leader?
In many ways Donald Trump has been good to his word, with perhaps his only failing so far the Mexican border issue, by attacking Obama healthcare reforms, sabre rattling with Russia and jumping headlong into the Syria dispute. These are issues which he brought up on numerous occasions during his presidential campaign and while many thought he was just “grandstanding” it looks as though he was serious. Some will view Donald Trump as a loose cannon although others will see him as perhaps one of the stronger US presidents of late.
We are now at a stage with Donald Trump where you wake up each morning wondering what will happen today. While this will certainly keep investors on their toes it does have the potential to seriously ratchet up the risk factor associated with markets.
Investor sentiment
While investors do appreciate strong leadership they do not appreciate worldwide tensions on the military scale we have seen over the last few days. In theory the US is now at odds with Russia, Syria and it has upset the Afghanistan authorities. This comes at a time when terrorism around the world is unfortunately an everyday occurrence and likely to stay that way for some time to come. It will be interesting to see how investors react when markets reopen next week and whether they appreciate Donald Trump’s hardline approach or whether some will fear we are moving one step closer to World War III.