Many moving parts
The re-election of Donald Trump is likely to have far-reaching consequences beyond the US. Domestically, the incoming President will almost certainly introduce more fiscal stimulus, meaning governments elsewhere, notably in Europe and China, will have little choice but to follow suit to offset any negative economic effects stemming from aggressive trade policy.
At face value, risk markets may continue to cheer the prospect of such ’pump-priming’, so we think a pro-risk stance remains sensible. However, it is imperative investors consider the downside risk that geopolitical hostilities lead to a fall in corporate confidence and recession, as well as the risk that inflation re-emerges and pushes bond yields higher.
The cross currents of taxes and tariffs
Prior to the election, the US economy appeared to be moderating as pandemic-related household savings were run down. The labour market in particular was showing signs of cooling, but in a reassuringly orderly fashion. The fact that the majority of households and corporates were dealing so well with higher interest rates was an encouraging sign of the underlying health of the US economy. With cooling activity came a reduction in inflationary pressures and the prospect of potentially significant monetary easing.
Explore the Investment Outlook
Market Insights Team
Karen Ward
Tilmann Galler
Maria Paola Toschi
Hugh Gimber
Vincent Juvyns
Aaron Hussein
Maximilian McKechnie
Natasha May
Zara Nokes
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