Emerging Markets / November 9, 2016

Economics and the Next Administration of the United States

As a hard fought election comes to an end, many are concerned about what comes next for the US economy. Certainly, a good deal of uncertainty surrounds the upcoming days and weeks. However, here are some of the economic trends and policy announcements that could be expected during the coming weeks.

Economics and the Next Administration of the United States

After a long and eventful election season, the Republican victory for both the presidency and the Congress of the United States has been received with a substantial degree of uneasiness and instability in the financial markets worldwide. Financial and investment instruments such as futures contracts, the stock markets, and even the US dollar in the foreign exchange market are showing downward signs and negative projections. Given this ongoing trend, the question for individuals and investors becomes what to expect over the coming weeks and how to protect their assets. It is expected that instability will only be temporary and that positive outlooks will be regained in the medium and long term.

The administration of President elect Donald Trump and the Republican Congress will prioritize reassuring world markets within the briefest period possible. Domestically, even though the Federal Reserve remains an independent and non-partisan government entity, monetary policy over the coming months will most likely be determined as a counterbalance to the economic policies of the next administration is sought in order to safeguard the stability of the US dollar as well as the domestic labor market. In order to stabilize and reassure the national economic sentiment, the next President should announce a paced and progressive implementation of his economic agenda. Any abrupt or unprecedented measures in regards to fiscal or trade policy could have extremely negative effects on domestic and international markets.

In the long term, it is expected that the policy measures implemented by the next administration could bear positive fruit. Hopefully, during the coming years, interest rates and government securities will regain their attractiveness and competitiveness for conservative investors. This will be mainly dependent on whether the US manages to secure steady economic growth and maintain unemployment at moderately low levels. In the meantime, investors should take advantage of promising financial opportunities overseas, particularly in emerging markets. Similarly, the agricultural industry, and major mineral commodities, all of which are real tangible assets, become attractive investment vehicles because of their safety. For example, the price of gold has gone up substantially over the last day as individuals look for safe assets.

In terms of international trade, the next four years will not bring any new free trade deals to the US economy, based on the statements pronounced by President elect Trump throughout the campaign trail. Likewise, if campaign promises materialize, the next administration will significantly increase the competitiveness of manufacturing and the level of consumer good production in the US. Similarly, domestic agricultural production could be greatly benefited by an agenda that focuses on self-sufficiency.

(Read more about French Agricultural Trade and Food Markets)