Weekly economic commentary: Election results don't clarify the outlook

Summary

United States: Election results don't clarify the outlook

• Even as the 2024 presidential election has come and gone, there is still a tremendous amount of uncertainty regarding the trajectory of the economy and Fed policy. Tariffs and a tax policy look to be on the docket in the next administration, which could come with higher inflation and thereby higher rates.

• Next week: NFIB Small Business Optimism Index (Tue.), CPI (Wed.), Retail Sales (Fri.)

International: Global and thematic implications of the US election

• In our view, Trump winning the White House and having a largely unilateral ability to implement tariffs and shift U.S. trade policy in a more protectionist direction is yet another deglobalization force. New trade barriers would have the potential to weigh on the interconnectedness of the global economy, which could have longer-term negative implications for global economic growth. We also view the election results as supportive of further U.S. dollar strength in the medium term.

• Next week: India CPI (Tue.), Central Bank of Mexico (Thu.), China Retail Sales & Industrial Production (Fri.)

Interest rate watch: Higher rates likely under Trump administration

• President-elect Trump’s victory sparked upward movements in equities and bond yields across the curve. This week’s Fed meeting was less eventful. As was widely expected, the FOMC reduced the federal funds target range by 25 bps to 4.50%-4.75%. Although Chair Powell declined to comment on the election, our expectation for the path of Fed easing has evolved. As we see it today, the potential for higher inflation next year raises the likelihood that the federal funds rate bottoms out closer to 4% than 3%.

Topic of the week: The 2024 US elections: Economic implications

• Election Day has come and gone. Donald Trump was elected the 47th president of the United States, becoming the second person to serve two non-consecutive terms as president. We walk through our preliminary thoughts on the recent election results and their implications for the U.S. economy.

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