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Trump, why analysts have missed all the predictions

Donald Trump, Trump, election USA, election USA, a year after

Donald Trump, Trump, election USA, election USA, a year after"The only function of economic forecasting is to make astrology look respectable". The notorious phrase pronounced several years ago by an often irreverent economist such as John Kenneth Galbraith received yet another confirmation from the financial market reaction to the unexpected election of Donald Trump to the US presidency.

At exactly one year apart from that vote, most of the forecasts (generally naughty, at least those regarding risky activities) that accompanied the hypothesis of the ascent to the White House of the US billionaire, they are far from making true.

 

Wall Street at fast pace 

Not only shares at Wall Street have gained 20% since then, they are at historic highs and challenge the never-well-coded laws of the severity of financial markets, but also in various fields different from the stock market and in the other areas of the globe, things do not look like have gone exactly as it was expected (or feared): there was no depreciation of the dollar that somebody indicated, nor the swirling rise in bond yields.

 

The lack of protection of gold, Yen and Swiss Franc 

Emerging Markets markets have not ended up adrift as they thought because of the threat of resorting to protectionist policies, as the fragile European recovery has not been questioned by a (and fortunately never happened) contraction of trade with the United States.

On the contrary, those who have been persuaded to buy classic assets to find shelter from the storm have now with a handful of flies in hand, if they chose gold, or even have to lick their wounds if they preferred Yen or Swiss Franc.

 

Bets won (or almost) 

Of course, denigrating the predictive capabilities of economists and analysts would be ingenious and probably unjust. Because ex-post they are all good at judging, and also because some prophecy has come true. Looking at the US stock market, for example, the securities of the companies involved in the design and construction of infrastructure and those related to the defence sector have in fact enjoyed great health.

But in the same way (if not more), the securities of banks where Trump had repeatedly pointed the accusing finger during the electoral campaign, and even the pharmaceutical companies on which should have hit the axe of the abolition of the Obamacare.

 

Beyond the missed promises 

Here, however, those who want to take on the defence of strategists could easily play a convincing card, because little of everything that "The Donald" had promised voters was actually transformed into reality, and the Health Reform that continues to come up against a brick wall in Parliament could be referred to as a good testimony in a hypothetical process to the detriment of economists.

However, it remains clear that, as well as four months before the US presidential election with the Brexit referendum, the great gurus of business banks have been unable to interpret moods and market reactions in the face of the less predictable event.

Few, in the end, thought that it could go through a few hours from the darkest despondency to that kind of strange euphoria that pervaded investors in the weeks immediately after the election, who made flank to the market the specially coined neologism of the "Trump Trade".

And always rare were those who, at the top of infatuation (during which, for example, they bet about a euro-dollar parity) suspected that investors might become doubtful about the ability to actually translate the promises into actions of the new tenant of the White House (such as, for example, the construction of the wall between the United States and Mexico).

 

Chessboard and pieces 

At 12 months from November 8, 2016, markets seem living that phase described by many as "irrational exuberance," on the brick of economic growth that global travels to the highest levels since 2011 (but in the United States has now reached a mature phase) and central banks that are starting to gradually reduce those provisions of liquidity which in turn have raised the valuation of financial assets.

In such a scenario, Trump seems to be just a simple chess piece, probably not even the most important of the chessboard, and for this reason, investors can afford to relegate his own choices in the background, thus contributing to hinder the prediction capabilities of many economists.

 

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