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Impacts of the US election

The third debate between Clinton and Trump has taken place and was arguably the most heated and argumentative of the three. After Clinton seemingly “winning” the first two based on public surveys, the third may well be deemed a tie. There was less talk of leaked emails and other scandals and finally a bit more detail on proposed policy. Clinton successfully highlighted Trump’s hypocrisy and contradicting comments regards tax, immigration and other areas, while Trump to his credit did a good job of highlighting Clinton’s unimpressive history in Government.

As it stands, Clinton is a clear favourite to be the next US president. After more media coverage of a presidential campaign than I can ever remember, it would be surprising to think that most US citizens that intend to vote, haven’t already made their mind up. That’s just the thing when it comes to the US and the fact that voting is not compulsory … who will turn out to vote? Will Trump supporters make the extra effort because they know they will need to, while some Clinton supporters may not bother, assuming the result to be a given, à la the UK Brexit vote?

What does the likely result of a Clinton presidency mean economically? It’s generally agreed that it means a continuation of what we have seen from the Obama administration and as such, we would expect a Clinton win to have little direct effect on the markets. This by no means plain sailing for 2017 as the US still has significant problems to overcome in the form of their national deficit.

What does the unlikely result of a Trump presidency mean economically? There are many who would argue that we would literally be in for World War III! I will just focus on the facts. What we can certainly expect to see from Trump would be the imposing of tariffs on the likes of Mexico, China and other low cost importers, reversing many years of efforts to free up trade and improve globalisation.

What we have seen for several decades, is countries like China, Taiwan and Thailand, making full employment their number one priority. This is in contrast to the Western world that has tended towards maximising profits. Naturally, this has gradually meant thousands of US businesses losing revenue and millions of blue-collar workers losing their jobs. It is angry individuals like this that Trump has targeted and done so very successfully.

So what we would likely see straight away is INFLATION rising significantly in the US. Depending on the severity, you would then expect interest rates to rise, although this is strongly expected before year-end anyway. As an ally to the US, any animosity that does indeed occur between the US and China could have serious knock-on effects on Australia, given they are the most important trading partner and that the South China Sea is one of our main shipping routes.

The figures seem to suggest that we are looking at an 80% chance of a Clinton presidency, but either way, the new president will be under unprecedented scrutiny, so I think we can expect yet another year of volatility on the markets.

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