First let me start by saying that despite the title of the article, all of the below applies to the brokerage industry as a whole, across all asset classes and not to FX. However since our publication is still primarily FX centered, I will start from the broad U.S. dollar rally that is upon us.
Mr Market has just endorsed “The Donald” in a vote of confidence that he can deliver on his promise to “Make America Great Again.” While the fans of the Washington “establishment” are in shambles, the American voter has chosen a president that promised to cut taxes for everyone, both individuals and corporations.
Alan Greenspan: “I’d love to see Dodd-Frank disappear”
The American people have casted their votes and the financial markets are marketing their powers to congress and taunting the U.S. government to take measures designed to open the capital investment floodgates that American investors are keeping closed.
Former Federal Reserve Chairman Alan Greenspan has just publicly voiced support for the reversal of the ‘Dodd-Frank Bill’. Moments ago he stated in a CNBC interview, “I’d love to see Dodd-Frank disappear.”
— alan greenspan (@alangreenspn) November 6, 2016
FX Volatility Rampaging Higher
The U.S. dollar has been supported by investors which are already stating to feel the chills from the incoming slew of elections in major European states. A referendum in Italy in December, parliamentary elections in The Netherlands, who are the biggest budget contributor into the European Union. To top it off, next year we also have parliamentary elections in France and Germany.
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The Japanese economy has grinded to a halt, which is hampering the country’s development. Shinzo Abe’s plan to continue propping up the banking system isn’t working. In the mean time, after spending several years to shore up their capital, U.S. banks are in a great shape to start providing the financing for the next generational investment cycle that is going to create the new generation of jobs that the U.S. economy needs.
Shinzo Abe’s plan to continue propping up the Japanese “zombie” banking system isn’t working.
As lunatic as this might sound to me since I have not been a fan of Donald Trump’s campaign, I am starting to get a positive picture from the latest developments. It is time to face it – the election process in the U.S. is a cultural thing. This year certain limits have been crossed that probably shouldn’t have been. But if we are to listen to Donald Trump’s victory speech, all we can hear is a presidential person that has a different face from the showman who taunted the American people.
Such a beautiful and important evening! The forgotten man and woman will never be forgotten again. We will all come together as never before
— Donald J. Trump (@realDonaldTrump) November 9, 2016
The brokerage industry is set to benefit in a great way from the incoming period if increased investment activity. Stock brokers will be continuing to take buying orders on the U.S. stock market, while FX brokers will continue taking bets on a sustained U.S. dollar strength. Of course, we will have bouts of volatility during the process as the confidence vote is not indefinite, but this doesn’t mean that the brokerage industry could be facing a boom if the Dodd Frank act is repealed.
Time to Invest
Companies from the brokerage industry that are bullish on Donald Trump’s presidency will have to start investing. Regardless of the outcome, the current status quo that was reigning across the U.S. economy is likely to be over for at least 4 years. Many big investors have been on the sidelines, awaiting the outcome from the U.S. election in order to ascertain new investment opportunities.
The American people have chosen that they are tired in investing in to government bonds and interest rates need to go higher. Time will tell, whether or not Donald Trump and the Republican congress manage to deliver on his promises. In the meantime investors are taking the call: “OK Donald, let’s make America great again!”