Donald Trump delivers a speech at a campaign event in Pennsylvania on November 1. (Shutterstock/Evan El-Amin)
After Donald Trump was elected president of the United States last night, global stock markets went on a roller coaster ride and are expected to remain volatile for the foreseeable future. For luxury companies in particular, a big part of how they fare will come down to whether or not Trump follows through on his vows to take a protectionist stance on trade with China.
Trump?s victory ?appears to be a clear negative for luxury goods stocks,? wrote Exane BNP Paribas Managing Director of Global Luxury Goods Luca Solca in an investor note on the election?s impact on luxury, saying that its effects on emerging market economies such as China would play an outsize role in brands? stock price fluctuations. The reason outlined is pretty clear?Trump?s stated plan to impose a 45 percent tariff on imports from China would dent China?s growth, prompting ?higher financial and economic tensions,? and as a result, lower consumer confidence and luxury demand in China, one of the world?s most important luxury markets. Solca lists demand from China and emerging markets as one of the three main pillars that luxury brands depend upon for solid stock market performance, as well as the ?wealth effect? and a strong U.S. dollar. The paper predicts that a lower U.S. dollar and higher interest rates will have a ?double whammy? effect on luxury goods companies. Liquidity?s ?flow to the USA...