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Immigration and Markets

Over the weekend, there were many upset countries about Trump’s ban on immigrants from major Muslim nations.  The stories began to pour out late in the weekend about Americans stranded in other countries because of his decision to act so soon.  Whether one agrees or disagrees is up for discussion.  But, everyone can surely agree that it isn’t good for the global economy and markets.  As the market took off under Obama, it was driven largely by zero percent interest rates, but also from markets being so global.  Everything America imports mostly comes from China and poorer countries.

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The wave of populism has taken off beginning with Brexit, and countries are beginning to look inside at their own interests.  It is good that countries want to protect their sovereignty and their people, but as populism begins to unfold further, it will hurt trade.  A ban on immigration is just the tip of the iceberg.  Donald Trump wants to tax many imports, and now he just put a tax on people wanting to come into the country.  That sends signals, both good and bad, throughout the market and how other countries are looking at America.  If markets and investors become nervous enough, they could withdraw investment and capital from America altogether.  If it does continue, investors and markets might see the withdrawal from the global marketplace as an act of isolation.  It is important to note that 23% of the global population is Muslim.  The United States, being the first to place major bans on Muslims, could be a domino among a host of other countries following suit.  As big as a threat that extremists are, we also had threats in the post 9/11 world.  The difference is that Bush did not ban immigrants coming here, he just increased security.  Looking at Europe and what happened in France, perhaps it doesn’t matter how much you increase security or the quality of screenings on an individual, someone will always remain unseen and fall through the cracks.  The current ban on Muslims is a large shock wave that got sent through the Middle East, and the global community is quite nervous.

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