Geopolitics

What A Trump Or Clinton Victory Would Mean For Markets

While markets have already expressed short-term preferences for the respective U.S. presidential candidates, the long-term impact is harder to gauge.

A file photo of fluctuating currency prices in Buenos Aires
A file photo of fluctuating currency prices in Buenos Aires
José Siaba Serrate

-Analysis-

BUENOS AIRES â€" Stock markets are said to anticipate the preferences of voters. Business is business, and markets always look to tomorrow, which is then factored into today's values. The problem is that the future is unclear and often inscrutable, and markets are not infallible. Brexit, the nose of traders assured us, would never happen.

The U.S. election presents another murky perspective, with even bigger stakes.

The longest running and farthest reaching campaign in history â€" judging by the media coverage â€" offers one advantage, namely the ample information provided on the degree of market sensitivity to the two very different contenders: Donald Trump and Hillary Clinton.

Their starkly contrasting figures facilitate market readings, and while one cannot know with certainty who will win, we have an idea of the reactions each would provoke â€" at least right away. A taste was given by rising share prices in response to Trump bungling the first presidential debate, and the boost given to the Clinton candidacy.

If Trump were to win, Wall Street and stock markets in the UK and Asia would likely fall between 10 and 15%, oil would lose four dollars a barrel and the Mexican peso would plummet 25%. There would be a significant rise in volatility.

That is the "precise" conclusion reached by Justin Wolfers and Eric Zitzewitz at the National Bureau of Economic Research (NBER), after examining the feedback registered from the performance of financial assets, after the first debate on Sept. 26. Conversely, the sudden turn in the campaign prompted by the FBI reopening its inquiry in the Clinton emails, confirmed the reactions to a sudden upturn in the polls of the Republican candidate.

Generally speaking, Clinton squares with a more solid economy and Trump is associated with high and persistent risks. There is no Republican "bonus" now with Wall Street, which has swept away the market's past preference for the Grand Old Party. Wolfers and Zitzewitz believe an implicit "Trump discount" will push stock prices down between 9-12%.

The fed hedges too

One should nevertheless distinguish between the immediate impact of the election result and its lasting implications, especially when it comes to any adverse effects. Brexit, for example, prompted a storm of volatility that soon lost its intensity, before discarding almost all its effects within weeks. Does that mean Brexit was irrelevant, and that its effects are over? Certainly not. The real, weighty consequences will emerge as the United Kingdom and European Union hammer out the conditions of their divorce.

The short-term dynamic here illustrates the so-called "black swan" phenomenon â€" those improbable, difficult-to-predict events with unexpected and sweeping effects. Given the fragile state of the world economy and markets, stock prices on the verge of overvaluation and brittle geopolitical conditions, this is not the time to make waves. The post-Lehmann Brothers markets have shown a propensity to sudden shutdowns, as shown by a half dozen crash-like episodes since 2010 and abrupt price drops that have for now, thankfully, proved ephemeral. Still, nobody can be sure any event will not trigger a domino effect.

It is natural to qualify a Trump victory as a repeat of Brexit, though with a crucial difference: Those in the UK who sought to break away from Europe mostly dissolved out of public life after winning. Nigel Farage, the head of the United Kingdom Independence Party, resigned from his position once results were announced. Brexit was a defeat for the establishment, but the elite remained in place in the form of a Conservative government tasked with managing the departure process.

Trump is another story. His populist agenda is just a part of the problem, which Congress can dilute. Of greater concern is the possibility of his filling the administration with utterly inexperienced functionaries.

Will the Federal Reserve trigger an interest rate hike in December? Futures markets think it is 75% probable. But monetary policy is conditional, and there may be no increase if Trump unleashes an economic and political storm. In response to Brexit, the Bank of England lowered its rate, eased credit supplies, promised tax cuts (yet to happen), then crossed its fingers.

If investors think it is 75% probable that the Fed will raise rates, it must be because they think it equally probable that Mrs. Clinton will become president of the United States.

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food / travel

The Food Truck, A Sign That The White And Wealthy Are Moving In

In San Diego, California, a researcher tracked how in the city's low-income neighborhoods that have traditionally lacked food options, when interesting food options arrive the gentrification of white, affluent and college-educated people has begun.

Balboa Park Spring Fling Food Truck festival

San Diego Food Trucks via Facebook
Pascale Joassart-Marcelli

SAN DIEGO — Everybody, it seems, welcomes the arrival of new restaurants, cafés, food trucks and farmers markets.

What could be the downside of fresh veggies, homemade empanadas and a pop-up restaurant specializing in banh mis?

But when they appear in unexpected places – think inner-city areas populated by immigrants – they're often the first salvo in a broader effort to rebrand and remake the community. As a result, these neighborhoods can quickly become unaffordable and unrecognizable to longtime residents.

An appetite for gentrification

I live in San Diego, where I teach courses on urban and food geographies and conduct research on the relationship between food and ethnicity in urban contexts.

In recent years, I started to notice a pattern playing out in the city's low-income neighborhoods that have traditionally lacked food options. More ethnic restaurants, street vendors, community gardens and farmers markets were cropping up. These, in turn, spurred growing numbers of white, affluent and college-educated people to venture into areas they had long avoided.

This observation inspired me to write a book, titled The $16 Taco, about how food – including what's seen as "ethnic," "authentic" or "alternative" – often serves as a spearhead for gentrification.

Take City Heights, a large multi-ethnic San Diego neighborhood where successive waves of refugees from places as far away as Vietnam and Somalia have resettled. In 2016, a dusty vacant lot on the busiest boulevard was converted into an outdoor international marketplace called Fair@44. There, food vendors gather in semi-permanent stalls to sell pupusas, lechon (roasted pig), single-sourced cold-brewed coffee, cupcakes and tamarind raspado (crushed ice) to neighborhood residents, along with tourists and visitors from other parts of the city.

Informal street vendors are casualties.

A public-private partnership called the City Heights Community Development Corporation, together with several nonprofits, launched the initiative to increase "access to healthy and culturally appropriate food" and serve as "a business incubator for local micro-entrepreneurs," including immigrants and refugees who live in the neighborhood.

On paper, this all sounds great.

But just a few blocks outside the gates, informal street vendors – who have long sold goods such as fruit, tamales and ice cream to residents who can't easily access supermarkets – now face heightened harassment. They've become causalities in a citywide crackdown on sidewalk vending spurred by complaints from business owners and residents in more affluent areas.

This isn't just happening in San Diego. The same tensions have been playing out in rapidly gentrifying areas like Los Angeles' Boyle Heights neighborhood, Chicago's Pilsen neighborhood, New York's Queens borough and East Austin, Texas.

In all of these places, because "ethnic," "authentic" and "exotic" foods are seen as cultural assets, they've become magnets for development.

Food vendor at outdoor international marketplace called Fair@44.

Fairat44 via Instagram

A call for food justice

Cities and neighborhoods have long sought to attract educated and affluent residents – people whom sociologist Richard Florida dubbed "the creative class." The thinking goes that these newcomers will spend their dollars and presumably contribute to economic growth and job creation.

Food, it seems, has become the perfect lure.

It's uncontroversial and has broad appeal. It taps into the American Dream and appeals to the multicultural values of many educated, wealthy foodies. Small food businesses, with their relatively low cost of entry, have been a cornerstone of ethnic entrepreneurship in American cities. And initiatives like farmers markets and street fairs don't require much in the way of public investment; instead, they rely on entrepreneurs and community-based organizations to do the heavy lifting.

In City Heights, the Community Development Corporation hosted its first annual City Heights Street Food Festival in 2019 to "get people together around table and food stalls to celebrate another year of community building." Other recent events have included African Restaurant Week, Dia de Los Muertos, New Year Lunar Festival, Soul Food Fest and Brazilian Carnival, all of which rely on food and drink to attract visitors and support local businesses.

Meanwhile, initiatives such as the New Roots Community Farm and the City Heights Farmers' Market have been launched by nonprofits with philanthropic support in the name of "food justice," with the goal of reducing racial disparities in access to healthy food and empowering residents – projects that are particularly appealing to highly educated people who value diversity and democracy.

Upending an existing foodscape

In media coverage of changing foodscapes in low-income neighborhoods like City Heights, you'll rarely find any complaints.

San Diego Magazine's neighborhood guide for City Heights, for example, emphasizes its "claim to authentic international eats, along with live music venues, craft beer, coffee, and outdoor fun." It recommends several ethnic restaurants and warns readers not to be fooled by appearances.

Longtime residents find themselves forced to compete against the "urban food machine"

But that doesn't mean objections don't exist.

Many longtime residents and small-business owners – mostly people of color and immigrants – have, for decades, lived, worked and struggled to feed their families in these neighborhoods. To do so, they've run convenience stores, opened ethnic restaurants, sold food in parks and alleys and created spaces to grow their own food.

All represent strategies to meet community needs in a place mostly ignored by mainstream retailers.

So what happens when new competitors come to town?

Food vendor at outdoor international marketplace called Fair@44.

Fairat44 via Instagram

Starting at a disadvantage

As I document in my book, these ethnic food businesses, because of a lack of financial and technical support, often struggle to compete with new enterprises that feature fresh façades, celebrity chefs, flashy marketing, bogus claims of authenticity and disproportionate media attention. Furthermore, following the arrival of more-affluent residents, existing ones find it increasingly difficult to stay.

My analysis of real estate ads for properties listed in City Heights and other gentrifying San Diego neighborhoods found that access to restaurants, cafés, farmers markets and outdoor dining is a common selling point. The listings I studied from 2019 often enticed potential buyers with lines like "shop at the local farmers' market," "join food truck festivals" and "participate in community food drives!"

San Diego Magazine's home buyer guide for the same year identified City Heights as an "up-and-coming neighborhood," attributing its appeal to its diverse population and eclectic "culinary landscape," including several restaurants and Fair@44.

When I see that City Heights' home prices rose 58% over the past three years, I'm not surprised.

Going up against the urban food machine

Longtime residents find themselves forced to compete against what I call the "urban food machine," a play on sociologist Harvey Molotch's "urban growth machine" – a term he coined more than 50 years ago to explain how cities were being shaped by a loose coalition of powerful elites who sought to profit off urban growth.

I argue that investors and developers use food as a tool for achieving the same ends.

When their work is done, what's left is a rather insipid and tasteless neighborhood, where foodscapes become more of a marketable mishmash of cultures than an ethnic enclave that's evolved organically to meet the needs of residents. The distinctions of time and place start to blur: An "ethnic food district" in San Diego looks no different than one in Chicago or Austin.

Meanwhile, the routines and rhythms of everyday life have changed so much that longtime residents no longer feel like they belong. Their stories and culture reduced to a selling point, they're forced to either recede to the shadows or leave altogether.

It's hard to see how that's a form of inclusion or empowerment.The Conversation

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Pascale Joassart-Marcelli is a Professor of Geography and Director, Urban Studies and Food Studies Programs at San Diego State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.


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