To say that President Trump has had a rocky start in office would be a bit of an understatement. Many of his campaign promises have come under scrutiny while others have failed to materialise altogether. Such political infighting has been exacerbated due to the fact that claims of Russian electoral influences seem more founded than in the past.

Thus, the global markets have been exhibiting a good deal of volatility in recent weeks. Why is this the case, what are investors worried about and what can we reasonably expect in the near future?

 

The Basic Issue of Confidence

 

We are all aware that the markets are built upon two emotions: greed and fear. While investors such as Warren Buffet often capitalise upon fear, he represents a small portion of the trading community as a whole. Many global markets have been on a slippery slope simply due to the fact that no one is entirely sure what to expect out of the Trump administration next.

With each scandal (or perceived scandal), investors are taking a watch-and-wait approach as opposed to adopting a bullish stance. Although Trump is currently on an international tour, many expect this negative mood to emerge when he returns to the Oval Office.

 

Is the Pro-Business Agenda at Risk?

 

In the past, Trump promised to reform the entire domestic business structure of the United States in favour of corporate-level entities. Recent events have called this intention into question. Indeed, many markets experienced their worst falls since the election due to the fact that this mechanism is now in doubt. The S&P 500 dropped 1.5 per cent while the FTSE shaved off one per cent of its value; breaking no less than 109 trading days of gains.

The main reason behind these movements is centred around the fact that opposition towards his budget plans is growing while a failure to follow through on such a major promise will cast doubt upon other major campaign promises.

 

The Tax Reform Issue

 

Another major scandal revolves around the tax reform stance that the Trump cadre has taken since campaigning. As if we are listening to a broken record, these very same intentions are now appearing to be less likely than in the past. Initial projections assumed that the package would be put into place sometime during 2017. This prediction is now pushed back to at least 2018 while some critics are stating that it may not come into effect at all.

Such sweeping reforms would have benefited businesses while placing more liquidity back into the pockets of the average consumer. Once again, global markets have reacted negatively and we do not expect any type of reversal unless the Trump administration outlines their plans in more detail. As transparency has not been one of his stronger suits, this is not likely to take place.

 

Rough Waters

 

What is perhaps the most ironic observation is that domestic politics and scandals have remained at a low point simply because Trump is currently travelling abroad. Margaret Yang at CMC Markets says that focus has now slightly shifted towards the multi-billion dollar deals ratified within the defence sector. While this has caused some markets to rebound slightly, the truth of the matter is that we are not out of the woods yet.

 

Domestic and global markets are looking for a modicum of transparency and security from what could otherwise be called an entirely muddled campaign. When Trump returns to the United States, focus will once again centre around political infighting and the ongoing scandals. So, we should continue to see this very same level of volatility. Investors must modify their strategies accordingly.