The results are in and the US has decided to elect Donald Trump as their next president. This widely unexpected outcome marks one of the biggest upsets in US political history, given Trump’s lack of previous experience in politics. The result is expected to lead to a significant shift in US policies and increased uncertainty across the globe.
How have markets reacted?
As expected, financial markets initially fell sharply given the raised levels of uncertainty. However, most have since recovered some ground.
The swings seen on the day of the result illustrate the higher levels of volatility and we expect this to persist while financial markets wait for indications of what a Trump presidency has in store.
How has our outlook changed?
At this stage, it is hard to predict the effect of this result on global growth. Any impact will be very dependent on the policies that Trump implements. His pro-business policies and plans for huge infrastructure spending are expected to be positive. However, his determination to protect US businesses from cheap imports raises the risk of a trade war which would likely be negative for overall global growth.
In the short term, the path of the US economy is now less certain and there is a higher chance of unfavourable economic outcomes (such as a recession or inflationary environment). Emerging Market growth may also suffer if Trump seeks to implement protectionist policies such as trade tariffs.
Nevertheless, our central expectation is that overall global growth will remain positive over the next 12 months, primarily driven by continued US growth. The robustness of the US economy means that we expect it to continue to grow for the time being, despite the increased uncertainty.