60 seconds with Keith Wade on political risk in 2017
Keith Wade looks at some of the economic implications of a Donald Trump victory.
All the focus at the moment is on the US presidential election, and we have seen the opinion polls narrowing quite sharply over the last month. So, the probability of Hillary Clinton winning is now about 56%; a month ago, it was about 70%, so it has come in very, very sharply and the probability of Donald Trump winning has increased quite significantly.
That would be very important for investors, not least because he has some very aggressive fiscal plans, and he also has some very aggressive trade plans. On the fiscal side, he wants to cut taxes and he also wants to cut spending.
I would be less concerned about the fiscal plans because I think Congress will rein him back on that but he’ll have a lot of freedom to do what he wants on the trade side, so we’ll probably see tariffs going up on China and Mexico. In terms of the US economy, I think that’d be quite stagflationary and quite damaging for the economy so that’s a bit of a negative for investors.
The other focus of political interest of course will be on Europe in the next few months. We’ll have the Italian referendum coming up in December but going into 2017 we have three general elections to focus on in the Netherlands, France and Germany, so political risk is going to be with us right through 2017.
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