Mediaboss Marketing

In one word - volatility. The market will keep see-sawing from optimism to pessimism with each executive order that is signed.

While the markets reacted positively to Trump post his election win and even after he was formally sworn in, the executive order on immigrants and refugees has vitiated the outlook.

Unfortunately, this is only the beginning and there is more to come, which can make the markets even more jittery.

While markets have blissfully for now ignored the insidious effect of President Trump ordering CEOs to bend to his saying, it will not be long before market forces take over and have their say in the feasibility of several of these decisions.

The viability of auto companies relocating their manufacturing from Mexico to the USA will ultimately be determined by markets and the cost will be paid by US consumers.

If this armtwisting is not regressive enough from an economic standpoint, it raises the more profound question of where is capitalism headed over the next decade. How will a de-globalised world economy look like and will it be pretty or ugly?

Is government intervention in independent companies the new norm? If so, is this not communism? For now, the popular opinion in the USA and in the UK and Europe is clearly with such populist policies.

Further, a full-blown trade war is increasingly becoming a probability and it can have a far worse effect on markets than the current executive order on refugees.

If this is not bad enough, the possibility of increased military tension with China can lead to a markets meltdown.

On the positives, the loosening of regulations and revamping of the tax code, especially allowing companies to bring back cash hoarded overseas, has the potential to significantly enhance US growth.

So, in conclusion, this will not be a ride for the faint-hearted.

On the domestic front, while we will continue to be periodically buffeted by global headwinds, our economy is on firm ground and the implementation of GST, transformation to a cashless economy and improving fundamentals augur well for the economy and by extension the equity market.

Retail investors should continue to invest through SIPs and have a long-term outlook.

(The author is CEO at Sundaram Mutual Fund. Views are personal)

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Trump actions have communist undertone, won't be long before market forces take over - Economic Times