2016 has certainly ushered in a healthy dose of political uncertainty and after the markets were caught off guard by the Brexit vote, a Trump victory has been perceived as a second strike for populism. There is a lot of pressure on the globalization status-quo, and because the transition to increased global trade was not efficiently managed, it contributed to a large structural displacement of labour and growing inequality. This popular discontent with wage growth, income growth and job loss has changed the political landscape.

There will be a big focus on the policy agenda under the Trump administration and the most obvious issue for emerging markets is trade, as Trump has vowed to renegotiate the North American Free Trade Agreement (NAFTA). We do, however, still await to see more details on policy implementation given that his campaign was light on specifics. Even with a Republican House and Senate, it is difficult to see what form future polices may take. It is worth mentioning that the president does have the authority to unilaterally pull out of NAFTA, which could see trading relations revert to pre-treaty norms.

Although Trump and Clinton stood miles apart on various issues, what they did share in common were views on infrastructure and defence. The US is likely to embark on an infrastructure spending program which will create opportunities for under-educated and lower skilled workers and could possibly ease pressures for protectionist policies.

In terms of market reaction, it was in line with expectations. A Trump victory has injected considerable uncertainty and volatility into the market. So far reaction has been swift with a selloff already observed in risky assets. US equity futures are down sharply, the JSE All Share Index was down over 2% in the first few minutes of trade. In terms of currency moves, the Mexican peso- which has widely been regarded as a proxy for Donald Trump’s chances- lost over 10% of its value against the greenback. The rand was not unscathed as the local unit came under pressure. Emerging market currencies will once again face some turbulence which may severely dent the return profile of local-currency bonds.  The market uncertainly has led to a rush into safe haven buying, as gold surged over 5%. However, on a whole, the markets initial reacted to Donald Trump’s surprise victory was not received as negatively as the Brexit vote.