Newsmax Finance Insider Mohamed El-Erian says there is a trio of feats Donald Trump must accomplish to ease the frayed nerves of half of America's financial markets.
Trump essentially must appear to the American public that he will be willing to graciously work with others, keep his vow on tax reform and refrain from trade protectionism.
"He's got to come across as he did at 2:30 this morning: as a unifier, now that the election is behind us," El-Erian told CNBC, explaining that Trump must continue the gracious tone of his victory speech.
"It's important that Mr. Trump came out in a very gracious manner, and that's why the markets came back from being 'limit-down 5 percent' to something much less worrisome," the chief economic adviser at Allianz told CNBC.
After plunging as much as 800 points Tuesday night, the Dow opened lower Wednesday, turned higher and then fell. Tuesday night's swoon was just above levels identified as "limit down" by the CME.
"For those who have chosen not to support me in the past, of which there were a few people, I'm reaching out to you for your guidance and your help, so that we can work together and unify our great country," Trump said in a victory speech.
El-Erian, chairman of President Barack Obama's Global Development Council, said the markets will react favorably to a plan from Trump that focuses on his pledges for tax reform, infrastructure investments and deregulation.
But he said financial markets will not respond well to a plan that is heavy-handed on trade protectionism. He said Trump should play down his platform on renegotiating trade agreements and imposing tariffs on China.
Trump's unpredictable pronouncements and opposition to free-trade agreements have made the real estate mogul unpopular with many financiers, who fear that he could disrupt global trade and damage geopolitical relationships.
Most investors were positioned for a Clinton win and a continued rally in stocks, the manager said.
"The positives of a Trump win are corporate tax reform, but the negatives are protectionism, and that is a really big thing," said Brian Kelly of Brian Kelly Capital. "More importantly what's he going to do with the Federal Reserve."
Kelly said he was likely to stick to macro-economic trades Wednesday and buy some gold. He said the "buy-the-dip" playbook of the equity bull market is likely out the window Wednesday for him and most traders.
"You got to let the market wash itself out. Maybe take a shot [at some stocks], but have to see how this washes out. The stocks to buy would be fiscal stimulus plays, the infrastructure plays, the GEs," Kelly said.
Mohamed El-Erian is the chief economic adviser at Allianz SE.
(Newsmax wire services contributed to this report).
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