Clinton clean sweep a concern for markets

All eyes are on next month’s US election, but the possibility of a Trump presidency is not the only concern for international equity markets. 

With Donald Trump’s candidacy for president of the United States called into question again last week, the possibility of a Hillary Clinton-led Democratic clean sweep has emerged.

However, this too could spell trouble for markets, according to AMP Capital chief economist Shane Oliver.

“Such a scenario would worry investors to the extent that it would make it easier for less business-friendly tax and regulation policies to be put in place that might weigh on health, energy and financial companies,” Mr Oliver said, with reference to the Democratic Party’s hopes it will retake both the Senate and the House of Representatives.

If Clinton does win in November, there will be an important lesson to heed, he told Nestegg.com.au. When Americans go to the polls on 8 November, many will not only be voting for their next president, they will also be choosing down-ballot candidates in the Senate and the House.

“What Brexit and the success of Trump indicate is scepticism amongst the electorate in the UK and the US of traditional economic rationalist policies, such as globalisation and economic deregulation. These policies have taken a bit of a toll on different groups, and the people who have been left behind are feeling a bit annoyed and that’s contributed to the success of Trump and the Brexit vote,” he said.

“Obviously governments need learn that they can’t let inequality rise forever [as] it can cause real problems.”

For much of the campaign, investors have been concerned about the possibility of a Trump presidency.

“A Trump victory, or anticipation of it, would be initially negative for shares on policy uncertainty and trade war worries, push up bond yields as the US budget deficit is likely to widen and US interest rates move higher and therefore positive for the $US,” Mr Oliver said.

However, the likelihood of the Democratic Party winning a majority in both the House of Representatives and the Senate remains small.

“The polls are clearly moving in Clinton's favour again, but it’s doubtful that it’s enough to generate a wave of support strong enough to see the Democrats take both houses of Congress,” Mr Oliver said.

“While there is a good chance the Democrats will gain a majority in the Senate, but not necessarily the 60 seat control, it’s hard to see them winning the 30 seats necessary to control the House.”

 

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