Senior Market Analyst at FXTM, Mr. Lukman Otunuga, has raised concerns over the impact of Donald Trump’s potential re-election to Nigeria and global markets as regards global oil prices and market stability.
Otunuga told THE WHISTLER that Trump’s emphasis on boosting U.S. oil and gas production could increase domestic supply, potentially putting downward pressure on oil prices in the long term.
Otunuga noted that Trump’s economic policies could spur U.S. growth, potentially leading to inflationary pressures. If this prompts the Federal Reserve to maintain elevated interest rates, a stronger dollar could further drive oil prices down.
This scenario, according to him, poses challenges for major oil-producing nations, particularly those that rely heavily on oil revenues. For Nigeria, in particular, a combination of lower oil prices and a stronger dollar could exacerbate existing economic difficulties.
He noted that several key assets could experience significant fluctuations if Trump returns to the White House.
According to him, gold prices fell as much as 1.5 per cent recently amid a stronger dollar and higher Treasury yields. Extended Fed rate hikes could limit upward potential for gold prices.
He said the renewed concerns over U.S.-China trade tensions have already led to a decline in Chinese equities and also concerns about potential tariffs on European imports weighed on market sentiment, leading to a dip in European indices.
He added that the euro, Chinese yuan, and particularly the Mexican peso have weakened against the dollar, signaling investor caution.
On the broader outlook, Otunuga said Trump’s return to the White House could establish a new market narrative, with assets tied to the “Trump trade,” including the U.S. dollar and Bitcoin, emerging as potential beneficiaries.
“Investors vividly remember the market reactions during Trump’s previous term, characterized by policy unpredictability and trade tensions with China.
” These factors contributed to an over 60 per cent increase in volatility on the VIX index from 2017 to 2020, before subsiding by about 10 per cent under President Biden,” he said.
Speaking on key implications of a Trump presidency, he said if Trump reclaims the White House, the financial landscape could see heightened volatility due to several potential developments.
According to him, Trump’s proposed tariff hikes on European and Chinese imports could reignite trade wars, impacting global supply chains and increasing costs for American consumers. A resurgence in inflation could prompt further Fed interest rate hikes, boosting the dollar.
A stronger dollar would likely weigh on gold prices and emerging-market currencies, placing additional pressure on developing economies.
He noted that Trump has voiced intentions to “end wars” and has indicated he would expedite an end to the conflict in Ukraine.
Any major shifts in U.S. foreign policy could add to global uncertainty and increase risk aversion among investors.
Otunuga warns that these potential shifts in both economic policy and international relations could set a volatile tone for global markets in the years ahead, keeping investors on high alert for renewed market turbulence.