Markets take benign view of Trump Presidency
Equity market gains and expectations the Fed will be more cautious in cutting official interest rates suggest that whilst investors expect fiscal stimulus and pro-growth deregulation from the new Trump administration, they are not, for now, pricing in a damaging global trade war. On that point, the Washington based Peterson Institute has estimated Trump’s proposals for 20% tariffs on all imports and 60% on those from China would cost the average American family $2,600 via higher prices, a 4% hit to their real incomes, and for the poorest 20% of households a 6% hit. Nonetheless, given Trump may loosen fiscal policy via further tax cuts, markets now expect the Federal Reserve to cut rates to only just below 4% by end-2025 (vs sub 3% previously) helping the dollar appreciate on November 13th to $1.06 against the euro and $1.27 vis-a-vis sterling.
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