What a year for underdogs: first, it was Leicester City winning the Premier League; next came Brexit, the UK vote to exit the European Union; then the Chicago Cubs took the World Series; and now a President-elect Trump.
After a long and hard-fought election campaign and polls showing a very close race, the U.S. populace responded yesterday with a demand for a change in direction. That request for a new path forward may not have been a huge surprise since 70% or so of U.S. citizens have been telling pollsters for several years that the country was going in the wrong direction.
Key insights:
• The pressure for change in this election was so strong that for one of the few times in history, Americans will control both the executive and the legislative branch at the start of a new Presidency.
• An emphasis on trade, tariffs, cancelling trade agreements, stopping immigration, or other anti-globalisation measures will be a big headwind for the U.S. economy, emerging markets, and China.
• On the other hand, if the focus returns to supply-side structural reforms, these could bring a bigger pickup in U.S. growth than we now expect.
• Unless the markets swoon at some point, we’d guess the rate hike by the Federal Reserve in December still occurs.
• The U.S. economic environment on the whole is pretty good and the global economy is in the midst of an economic bounce and has been since April.
• The good and improving global economy should counter any negativity, at least for a while.
Read the full Economic Insights and visit the dedicated landing page for all election content from Principal Global Investors.
