Monday, January 16, 2017
Take a Gamble on Trump
There are many advantages to spread betting not least the flexibility to engage in transactions whilst on the move and in your spare time. In addition to this, as you don’t own the asset there is no need for large capital investment. The basic principle of this form of investment and trading is a simple one. However, albeit straightforward it would be prudent to enlist the support of a professional such as the CMC markets, an online trading and investment company.
The recent United States Presidential election has, as would be expected caused some nervousness in the markets, however careful analysis is required to determine the possible impact on the markets over the coming months and in particular the impact on spread betting.
To look at this in detail we need to consider the principles of spread betting. There are different methods of spread betting but we will concentrate on online trading. This provides an excellent method of monitoring the markets and managing individual spread betting. We have already touched on the advantages of the process but in addition to this a key factor is the fact that spread betting is considered to be gambling and as such any profit is not subject to taxation. Unlike some forms of trading the investor does not buy shares but buys a stake (points). In addition the investor can also sell their stake. The point at which the stake is sold is the important factor as this will dictate the profit (or loss) that will be made. Spread betting allows the trader to trade on the price of movement of thousands of financial markets including commodities, indices, stocks and shares.
The fact that the trader is trading on the price of movements on thousands of financial markets is where the outcome of the US Presidential elections becomes a factor, in that elections affect markets and confidence in them which in turn impacts on values. Trump continues to affect the stock market but concerns his election would have disastrous effects on the markets have simply not come to fruition with markets holding firm. So, for the time being it remains “business as usual”. The coming months are of course difficult to predict but it is possible to analyse the potential impact of Trump’s proposed policies on the markets.
Trump’s plan on tax is the reduction of 7 income tax brackets to just 4 which would lead to tax cuts for many and in some cases will see some households pay no income tax at all. This may well increase spending and boost both the dollar and the indices. In addition, Trump claims he will half corporation tax to encourage US companies to keep their activities in the US rather than using less expensive territories abroad. This again is likely to lead to higher stock prices. In addition cutting regulation on business should have a positive impact on the markets. If Trump is able to deliver this, as promised, within his first 100 days of office it is likely this will improve market optimism. Increase in spending will also likely boost the economy and in turn increase stock and share values. This has to be tempered with the strict management of the national debt over the mid to long term duration of the administration. Concern on how Trump’s policies will be funded may have a negative impact on the economy but one that in the short term is unlikely to impact significantly on the markets. Managing debt plays part of his overall plan.
The end result of the new President taking up office is that the markets are likely to be at worst stable but are actually more likely to be boosted. This should provide the spread better significant opportunities to see their stakes increase in value to allow a good profit to be made if carefully monitored and managed. Online technology will allow the spread better to monitor the markets closely and buy and sell at the most opportune times. Online management of transaction should allow them to act promptly regardless of their physical location.
So with a little optimism and nerve there remains profit to be made.
Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.Dr. Doom also trades currencies and commodity futures like Gold and Oil.
Posted by Nicole Bourbaki