Belicose isolationsim
Kevin Gardiner, global investment strategist at Rothschild Wealth Management is somewhat more sanguine. He believes that a Clinton victory would effectively be business as usual, pointing out that while some areas of the market such as healthcare would face headwinds, under Clinton, her policies would unlikely be a game changer for markets.
In the case of a Trump victory, while it “seems a dramatically different prospect, – in practice it might not be,” Gardiner said.
He agrees that Trump’s policies remain fluid, but is of the view that he would face moderating advice from the cabinet, the legislature and the judiciary.
And, although Trump’s tendency toward “protection and a bellicose isolationism” would be bad for both the US and global business, his push to reduce personal and corporate taxes substantially, and boost infrastructure spending could be beneficial.
“Much as we would worry about the long-term consequences of protectionism, this fiscal expansion might be potent. A big increase in US government borrowing could encourage the Fed to raise rates, and the bond markets might take fright even if it doesn’t. A surge in interest rates is one of the reasons why some commentators think an immediate slump is likely. But in the current climate, we’re sceptical such a surge would happen.”
He added: “Despite the obvious risks, then, investors should keep an open mind about the narrow economic and financial implications of a Republican win on 8th November. A fear-induced sell-off in stocks could start at a higher level than today’s, and might be limited in scale.”
For both Papic and Lafferty, irrespective of who wins, the world will be left with an America that is likely to spend more money, in which the low income population is more active and is depanding more redistribution, higher entitlements and higher minimum wages.
“This leaves you with higher deflation globally,” says Papic, “and that is a paradigm shift the world needs to recognise is underway.”
