UOB views on the US presidential election

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by Mr Alvin Liew, UOB Senior Economist, on the two possible outcomes – if Hillary Clinton or Donald Trump wins.

One of the more immediate issues that the new US President needs to tackle is the expiry of the temporary suspension of the US government debt limit on 15 March 2017

What could happen if Hillary Clinton wins

Impact on the US Economy

  • To determine the impact of a Clinton presidency on the US economy in 2017, we would need to consider the following sub-scenarios:
  1. Should Republicans retain the majority in both the Senate and House or if Democrats win the majority in Senate while Republicans retain the majority in House

While Clinton will likely try to reach across the aisle to work with Republicans, we do not expect major changes or reforms, especially in areas such as immigration policies. It would likely be a business-as-usual outcome with some bipartisan support for infrastructure spending. We expect a small chance (<35 per cent) of the US passing the Budget.

  1. Should Democrats win the majority in Senate and House

A clean sweep by the Democrats will ensure a higher likelihood of reforms, especially in the corporate tax code and immigration policies, as well as more direct infrastructure spending. This scenario presents the best chance for the US to pass the Budget.

Impact on global markets and economies, especially Asia, in the near and long term

  • Essentially, we think that a Clinton presidency will provide a “business-as-usual” outcome for Asia. However, it is too early to say if she will shift her position to a more supportive stance on the TPP.

What could happen if Donald Trump wins

  • A Trump win is likely to create immediate uncertainty in financial markets, in particular placing equity markets under pressure. There would likely be a rush into safe haven assets, US treasury bonds, gold, Japanese yen and the Swiss franc.
  • Questions will also centre around the appointments of key roles, such as the chiefs of Defence, Treasury and chair of the Federal Reserve (in 2018).

Impact on the US Economy

  • To determine the impact of a Trump presidency on the US economy in 2017, we would need to consider the following sub-scenarios:
  1. Should Republicans retain the majority in Senate and House

There would be a high chance of the US passing the Budget. Some of Trump’s proposed tax and infrastructure measures could be passed, and there is likely to be a near-term economic boost.

  1. Should Democrats win the majority in Senate while Republicans retain the majority in House

Trump’s controversial measures will not be passed. It is likely that there would be some form of political gridlock.

   iii.        Should Democrats win the majority in Senate and House

The current political gridlock in the US Congress would likely continue.

Impact on global markets and economies, especially Asia, in the near and long term

  • We think that a Trump presidency could be negative for trade between the US and Asia. Asian currencies, especially the Chinese yuan, could face upside pressure. Consequently, Asian central banks would have to stay “lower for longer”.

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UOB views on the US presidential election

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