Why Trump is great for FTSE 100

Trump made a lot of promises during a dirty election campaign. Much of it has been dismissed as bluster and hyperbole. Will he really build a wall along the Mexican border, start a trade war with China, or rip up climate change agreements?

"We just don't know" is the answer, but there's currently enough money willing to bet on the best policy outcomes, and ignore the worst, to drive share prices sharply higher.

Odd, isn't it, that last week the thought of Trump moving into the White House caused a slump in the S&P 500 to 2,083, a four-month low. A nine-day losing streak was the worst run in 36 years. If Trump actually won, well, it's armageddon. Wrong.

Tipped to plummet, the broad-based S&P 500 closed last night up 1.1% at 2,163. Over here, the FTSE 100 this morning broke above key technical resistance, extending post-election gains since last week's low to around 5%, or 320 points.

Good for business

So why are Wall Street and moneymen the world over now backing Trump?

Profits. You could put a monkey in the White House, and stocks would rise if it was good for business. Trump might have a string of dafties, and a cupboard full of potentially incendiary policies, but some ideas are interpreted as positive for company profits, currently growing at only a modest lick.

Yesterday, we reported that president Trump "might not be that bad if he softens his political agenda". Ditch protectionism and focus instead on fiscal stimulus - higher infrastructure spending, tax cuts and deregulation - and we might have something to smile about.

Trump wants to repeal Dodd-Frank reforms, which he says put too many restrictions on banksBanks have certainly perked up - Morgan Stanley surged 7% yesterday, Goldman Sachs 6%, and JP Morgan Chase hit a record high. That might seem strange, given Trump had little backing from Wall Street during the election campaign, but some of his ideas resonate with traders.

Trump wants to repeal Dodd-Frank reforms, which he claims put too many restrictions on banks. It will be tricky, but a possible boon.

"The financial sector could experience a sustained rally too if, as Trump has suggested, he reverses some of the banking regulations implemented since the 2008 crisis," says Luca Paolini, chief strategist at Pictet Asset Management.

And in an interview with CNBC, Dick Bove at Rafferty Capital Markets said Daniel Tarullo, the Fed official who oversees the banking system, "is gone". Appointing more "industry friendly" regulators is bullish for the sector.

More obviously, plans for a massive pro-cyclical infrastructure programme don't just benefit the companies employed to build thousands of bridges and fix highways.

Ashtead and CRH have already surged, but spending $1 trillion (£804 billion) over the next 5-10 years - assuming America can afford it - also injects further demand into an economy already growing at an annualised 2.9%.

That's a potentially massive boost for growth, not just in America, but also globally. And that means extra demand for metals like copper, zinc and nickel. Unsurprising, then, that miners like Glencore and Anglo American have blazed a trail higher Thursday.

More incredibly, Chile-focused copper miner Antofagasta rocketed as much as 23% to an 18-month high. Vedanta is up over 14% and small-cap plays like Atalya Mining have soared by a quarter.

Buy Kazakhstan

There's also another trade at play here, and that's Kazakhstan.

President Nursultan Nazarbayev, who's ruled the country since before the Soviet Union collapsed in 1991, clearly believes Trump is less concerned than Hillary Clinton about promoting democracy and human rights.

Trump's bro-mance with Vladimir Putin could also reflect well on the region. "We are interested in maintaining, developing and strengthening our relations with the United States," said local MP Maulen Ashimbayev. "Russia is a key partner in all spheres. And so improvement of relations between the United States and Russia is in line with our interests."

Both Kaz Minerals and Central Asia Metals are up over 10% Thursday.

Despite the potential upside for stocks, massive risks remain while Trump rules the White HouseWe also know Trump is something of an expert when it comes to his own tax affairs, but he's also promised to go easy on massive corporations like Apple, who together have around $2.6 trillion stashed in foreign bank vaults.

Nancy Curtin at Close Brothers Asset Management tips a one-off amnesty tax of 10% to raise $150 billion to bankroll his spending plans.

He'll need all of that and more to fund tax cuts. Expect him to simplify the tax code and slash corporate tax rates from 35% to 15%. That, and infrastructure projects are now much more likely to happen, given Republicans now control both houses of Congress.

Despite the potential upside for stocks, massive risks remain while Trump rules the White House.

What happens after this honeymoon period is less clear, and there's a sense that this is very much the calm before the storm. After talking the talk, Trump's gotta "walk the walk", and his unpredictability and long list of potential flash points do pose threats as well as benefits to global financial markets.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.