The US election

The one good thing about the US election is at last we have an event other than Brexit that people think matters and may move markets. Even the commentators with Brexit distorting glasses stuck on their noses might notice this. I have kept out of the merits of the candidates, as the USA does not need foreign help to make up its mind. I am certainly not going to go into the intricacies of their characters and the various charges made against each, in what has been a campaign dominated by character issues on both sides. It is, however, now appropriate to look at what each candidate might mean for the wider world economy and markets.

There has been precious little proper analysis of what the two different candidates would do if elected. Investors say they want Hillary Clinton to win, and suggest markets might rally a little if she did. They usually go on to say they think her proposals on healthcare and banking would be negative for those sectors. They tend to dislike her more protectionist rhetoric post the Sanders challenge, her more regulatory stance, and even her greater hawkishness towards the Middle East than Mr Obama. In other words, they are mainly optimistic about her winning and the consequences of her victory in general terms, yet they seem to dislike much of the small print.

They have the opposite view of Donald Trump. They are highly critical in general terms. They are worried by his stance on migration of labour, by his tougher rhetoric towards Chinese trade and by his hostility to various trade deals, as well as often referring to character issues. They expect a Trump victory to lead to a loss of confidence and a sell off. They tend to ignore his proposals to cut corporate and individual taxes, to seek to repatriate large sums of offshore company cash, and to increase infrastructure spending. Hillary Clinton also wants to give an infrastructure spending boost. Several of Mr Trump’s proposals would normally be welcomed by investors if coming from someone else.

Either candidate is likely to seek to reflate the economy some more, by spending more and borrowing more in the short term. Mr Trump would seek to supercharge this with large tax cuts. Both may experience difficulties in getting their various economic packages through the Congress and Senate, but the direction of travel towards more reflation is clear. Given the reasonable performance of the US economy this year, this may generate modestly higher interest rates. It should also be helpful for the wider world economy.

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22 Comments

  1. oldtimer
    Posted November 9, 2016 at 4:21 am | Permalink

    If Trump wins he will breath new life in the US coal industry. This will have consequences for the Paris agreement – probably it will kill it as China will no longer play ball.

    Seeing the results come through it looks much like the Brexit vote.

  2. Lifelogic
    Posted November 9, 2016 at 5:23 am | Permalink

    What the UK presidential election shows is that however dire the candidate, people really hate the politically correct, lefty, green crap pushing, incompetent, tax borrow and waste lefty establishment even more.

    Trump and his protectionist agenda is not at all to my taste. But every time I hear Clinton’s dire supporters talking economic and lefty PC drivel (with their the evil politics of envy and magic money trees) then I felt I would have had to vote against her.

    Let it be a lesson to T May (who show many signs of being similar to Hillary) that people are sick to death of the largely incompetent and bloated state sector, the climate alarmism agenda, the endless PC drivel, of taxes that are far too high and complex, of the EU and of the largely failed state sector establishment.

    80% of people work in the private sector. Just get out of their way for a change and stop over taxing them. This is the way to growth. Not gender pay reporting, absurd white elephant projects, endless tax increases, climate alarmism, expensive energy, wage controls, workers on boards and endless more red tape.

    Let us hope Hammond grasps this for his autumn statement.

    Also a lesson to people that being a “Woman” or being “black” and wittering on about “glass ceilings”, PC drivel, “fairness” and “discrimination” is not sufficient. You have to be competent, intelligent and have a working compass too.

    • Lifelogic
      Posted November 9, 2016 at 5:27 am | Permalink

      Let us hope that Theresa May copies Trump and scraps the Paris climate change agenda, all the greencrap grants and all the climate alarmism lunacy.

      We need cheap, reliable, on demand energy in order to compete and be more productive.

      Get the state out of the way.

  3. formula57
    Posted November 9, 2016 at 5:54 am | Permalink

    Let us keep in view that the new President is much more pro-Brexit than is Mrs Clinton and so likely to give us a place nearer the head of the queue in negotiating a trade deal, amongst other benefits. He also has refreshing views on NATO that may cause our EU partners to re-think their freeloading ways on defence and he may well harmonize relations with Russia, including doing away with the mutually damaging trade sanctions.

    • Sir Joe Soap
      Posted November 9, 2016 at 7:24 am | Permalink

      Indeed.
      Brexiteers-ahead of the game, rather than behind it.
      And what a sore head for D Miliband this morning.

    • Know-dice
      Posted November 9, 2016 at 9:06 am | Permalink

      That’s the way I see it.

      Only time will tell…

    • Denis Cooper
      Posted November 9, 2016 at 10:06 am | Permalink

      It was “line”, not “queue”, when Obama agreed to threaten us.

      • Denis Cooper
        Posted November 9, 2016 at 10:08 am | Permalink

        Sorry, you’re right, it was “queue” not “line”.

    • Hope
      Posted November 9, 2016 at 10:13 am | Permalink

      JR, when will you and the other politicos “get it?”. Cameron claimed he got it in 2009 and then deliberately failed to act and deliver on his clean up promises. Look across the European continent: Sweden, Denmark civil unrest, Italy at boiling point, Greece, Spain and Portugal destitute, employees fleeing to the U.K. and Germany to get work undermining our wages and job opportunities for British people. People scared about extreme Islam, politicians scared to act and make matters worse by ignoring the problem. When Trump, Farage and others highlight issues that matter to ordinary people they are silenced by the elite and media, smeared to scare them into silence. Schools having to fill in forms if anyone suspects children or staff might make a comment that could be construed in any way racist. Police paralyzed to act impartially. In contrast School inspectorate unable to shut down schools deemed to be radicialising. children and promoting inequality towards girls. Rotherham scandal ignored for the same reasons. Thousands of white girls abused in the most horrible way. Even unusually Jack Straw made a comment and failed to act upon it.

      Farage is correct that the politicians will have to start to listen to the public. Clarke’s arrogance over the referendum calling it an opinion poll sums up his pompous out of touch elite mentality that is wide spread at Westminster and amongst the bilderberg few.

      Stand up Teresa May let us see how bold you can be towards the elite and media and get us out of the EU ASAP as the PUBLIC wanted, not MPs.

    • Mockbeggar
      Posted November 9, 2016 at 12:36 pm | Permalink

      I heard a former Italian Prime Minister, now a European Union Comissioner, being asked about Trump on the Today programme this morning. He said that it would men that the EU would need to strengthen its joint defence systems because of Trump’s reluctance to support Nato members who aren’t paying their full wack into their defence budgets. Perhaps EU countries who are also members of NATO should look into that aspect first. They would be a lot safer.

  4. Mark B
    Posted November 9, 2016 at 6:04 am | Permalink

    Good morning.

    “I have kept out of the merits of the candidates, . . .”

    They have ‘merits’?

    What Mr.Redwood MP sir, you a comedian now ? 😉

    • Lifelogic
      Posted November 9, 2016 at 7:18 am | Permalink

      The main merit of Trump (for all his many faults) is that he has not been taken in by all the climate change alarmism, the PC drivel and magic money tree & politics of envy of the establishment.

      I suspect he will become more pragmatic and end up a better president than many people currently think.

    • David Price
      Posted November 9, 2016 at 7:51 am | Permalink

      Well one obvious merit is that Mr Trump has the support of the majority of voting US electorate, just like Brexit is the will of the majority of voting British electorate.

      People would do well to reflect what that means in a democracy, whether they are lawyers, judges, civil servants or politicians.

  5. Iain Gill
    Posted November 9, 2016 at 7:30 am | Permalink

    ISIS fighters are going to feel the impact rather quickly I feel.

  6. Ian Wragg
    Posted November 9, 2016 at 7:57 am | Permalink

    Well the BBC are at least consistent backing Hillary and being absolutely wrong.
    When Trump showed a small lead the commentators always qualified it by saying it was in the margin of error. Last night they were trumpeting a 4% lead by Hillary with no such qualification.
    Black arm bands all round at the BBC.
    No doubt the luvvies will be demanding a rerun of the election as the proles got it wrong again.
    Pollsters trying to lead the voters. Failed.

    • rose
      Posted November 11, 2016 at 11:27 am | Permalink

      But to give credit where it’s due, Emily Maitlis behaved impeccably. It was Andrew Neil who looked as if he were at a funeral. I would have expected it to be the other way round.

  7. Bert Young
    Posted November 9, 2016 at 9:11 am | Permalink

    Both candidates were , arguably , not the most traditional from many points of view and we , the watching outsiders, were nervous of the outcome . As a relatively modest investor I was not concerned that markets would dramatically fall , Trump is no fool and he will not put the energy and success of USA commerce and industry at risk .

    Now the Republicans have control of both Houses , we should not see the sort of shilly-shallowing that existed during the Obama regime . Immigration – or the lack of control over immigration , is a concerning factor , so , Trunp’s stance on this matter will go down well there . Trump has also given a green light to our position on Brexit ; we ought to capitalise on this particularly with the extent of US business interests in this country . The establishment has been rocked to the core with the result ; it represents a considerable shift in the way types of individuals have influenced the world .

    Fingers crossed !.

  8. Juliet
    Posted November 9, 2016 at 10:54 am | Permalink

    Polls got it wrong!

    Undoubtedly the voters motivations: overlooked working class and an under pressure middle class – growing frustrations over the political and economic status quo

    Pollsters: exit polls less about the jobless. More about identity: race, nationality, gender

  9. ian
    Posted November 9, 2016 at 12:47 pm | Permalink

    Open door to brexit right away with companies paying wto not countries.

  10. rose
    Posted November 9, 2016 at 1:44 pm | Permalink

    My main worry about Mr Trump is that he has a serious programme which he won’t be able to get past the Republicans, partly because it will cost a lot – especially renewing the infrastructure – and partly because, as with, for example, the proposals on bringing back jobs, i.e. protectionism, they think the opposite would be best for the country. So a lot of decent people may be disappointed.

    His being half Scottish and well disposed to us and our Independence movement is a plus. How stupid of Mrs Merkel to make a moralising, finger-wagging, globalising speech at him when he is of German descent and she could be reaching out to him. But of course she doesn’t believe in nation or nationality.

  11. ale bro
    Posted November 9, 2016 at 3:34 pm | Permalink

    Repatriating the cash that is stuck offshore involves giving US companies a waiver on their foreign tax liabilities. This can’t be right. The cash is stuck offshore because US companies have found ways to game the EU tax laws – e.g. the double irish with a dutch sandwich – by transfer pricing. They can’t move the cash back on shore as it would be taxed at the US corporation tax rate, 35%.

    Surely the UK government will fight this as it gives US corporations the green light to continue with abusive revenue recognition techniques.

    US corporations could have chosen to pay UK tax at 18%, but of course they prefer to pay zero.

  12. David Lister
    Posted November 9, 2016 at 6:52 pm | Permalink

    ” … the US election is at last we have an event other than Brexit that people think matters and may move markets. ”

    Even with a Trump victory the markets have barely moved.

    It’s just further evidence of how much more significant Brexit is for the UK. Nothing else comes close to being able to shift a 15% fall in a currency!!

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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