US Elections: After the dust settles – ANZ

Research Team at ANZ, suggests that the price action in the past 48 hours reinforces how important fiscal policy and Governments are going to be going forward.

Key Quotes

“We are moving into an era where fiscal policy will come more to the fore in terms of market thinking and central banks less so. Trump’s conciliatory acceptance speech has gone a long way towards placating anxious markets who took encouragement and have subsequently focused on Trump’s election policies of greater fiscal expansion (an infrastructure boom “second to none”) and less regulation.”

“The anticipated policy mix of less monetary stimulus/looser fiscal policy has superseded earlier anxiety and has supported a stronger dollar and higher bond yields. What the degree of stimulus will be remains unknown and markets will need clarification in order to propel them further on this theme. For now, the prospect of less regulation and more fiscal stimulus means more growth and is hence a positive. The issues here are numerous. You are not going to re-establish the social contract between the electorate and politicians without a major shift in the policy landscape. Tinkering won’t cut it. And that landscape will be more insular, nationalistic and push back from globalisation; that’s bad for trade, foreign relations, geopolitical stability, capital flows, supply chains and productivity.”

“Risk premiums need to rise and curves steeper. Insiders (those connected to Government spending) win, and outsiders (the globalised champions) lose. The net is not growth enhancing; it’s negative. The economics of building big will be swamped by less trade.”