if it still isn<u+2019>t entirely clear what brexit means, then what does donald trump <u+2019>s boast that he will deliver a <u+201c>brexit times 10<u+201d> electoral upset mean? until now, many european investors will have given little thought to the prospect of a victory by mr. trump<u+2014>or <u+201c>mr. brexit<u+201d> as he has taken to calling himself. polls long suggested that hillary clinton had next week<u+2019>s u.s. presidential election in the bag. from a european perspective, mrs. clinton is the continuity candidate: her victory is unlikely to lead to any significant changes in u.s. macroeconomic policy. the federal reserve would still be dominated by doves and congress would remain gridlocked. mr. trump, on the other hand, is the change candidate, and now that he leads in some national polls, investors must try to work out<u+2014>as with brexit<u+2014>what change he might bring. in fact, brexit provides a rudimentary road map for what to expect and where the key risks lie. there are already signs that investors have learned lessons from june<u+2019>s referendum, which took many badly by surprise. even though the polls suggest that mrs. clinton is still well ahead in terms of likely electoral college votes , investors appear to be taking risk off the table ahead of the vote. in the past week or so, the vix index of volatility has risen from around 13 to just under 20 points; the s&p 500 has fallen for six trading days in a row, for the first time since february 2015; and the stoxx europe 600 has fallen for seven days, for the first time since february. developed market bond yields have risen sharply, giving back some of the gains of the past few months, while the dollar has fallen, as have several major emerging-market currencies. yet even if a trump victory delivers a market shock, the brexit experience suggests it need not deliver an economic shock<u+2014>at least not immediately. the u.k. economy has continued to perform well, growing 0.5% in the third quarter despite the pre-referendum warnings of most economists. that is largely because nothing so far has changed<u+2014>and nothing much might change in the u.s., either, in the early days of a trump presidency. his economic plans remain unclear and will depend in any case partly on his relationship with congress. a promised fiscal stimulus in the form of increased defense and infrastructure spending plus tax cuts could provide a near-term boost to domestic growth, but any resulting boost to european growth would likely be less than 0.1 percentage point of gross domestic product, reckons holger schmieding, chief economist of berenberg bank. as with brexit, it is future international relationships that will most concern european investors after a <u+201c>brexit times 10.<u+201d> a crucial question is how far mr. trump might follow through on his anti-free-trade rhetoric, including threats to rip up existing trade deals and impose punitive tariffs on chinese imports. europe<u+2019>s smaller, open economies are far more dependent on global free trade than the u.s. and have potentially far more to lose from any disruption to the global trade order. further, if mr. trump<u+2019>s more confrontational approach toward china led beijing to start unloading u.s. assets, that could also have a damaging impact on europe, since a weaker dollar and higher bond yields could hurt european exports and growth. that would raise fresh questions about the european central bank<u+2019>s ability to hit its inflation target. a second question concerns how mr. trump might approach geopolitical issues. europeans are already highly exposed to the crumbling of the current global order, with conflicts and instability throughout its neighborhood. the arrival of more than a million refugees from war zones in the middle east over the past year has strained political cohesion in the european union, while the eurozone has paid a high economic price from sanctions on russia after its annexation of crimea and the partition of ukraine. with tensions with russia already at cold war levels, european investors will be on high alert for any evidence that a trump administration was reducing its commitment to nato or giving encouragement to moscow<u+2019>s expansionist instincts. any further escalation of tensions with russia, particularly in eastern europe, could be damaging to european confidence. a third question is what impact a trump victory would have on europe<u+2019>s own politics as it heads into a busy electoral year in 2017 with elections in the netherlands, france and germany. will it fuel a surge in support for insurgent, euroskeptic parties? the evidence from brexit itself suggests perhaps not: in the immediate aftermath of the referendum, opinion polls suggested that support for mainstream parties and eu membership went up in other member states. but if european voters perceive that both britain and the u.s., the two principal architects of the postwar rules-based multilateral order, are turning their backs on that order, support for nationalist parties and policies could grow, undermining support for integration. <u+201c>we see the combination of brexit plus trump as the biggest challenge to the european union,<u+201d> says ian harnett, chief economist of absolute strategy research. the problem for investors is that all these risks remain highly speculative<u+2014>and may remain so for some time until the new political landscape becomes clearer. as with brexit itself, <u+201c>brexit times 10<u+201d> may turn out to be a very big deal<u+2014>or it may not mean very much at all. corrections & amplifications: in the past week or so, the vix index of volatility has risen from around 13 to just under 20 points. an earlier version of this article incorrectly stated it has risen 9% to just under 20%. (nov. 2, 2016)
investors consider a <u+2018>brexit times 10<u+2019> trump win  - wsj
simon nixon