Investors brace for U.S. elections

Mary Pieterse-Bloem, Professor of Financial Markets at Erasmus School of Economics

Investors will look back with mixed feelings on President Trump’s two years presidency. The US president brought tax cuts and rising stock prices, but also fear and uncertainty because of the trade war with China. The elections for the House of Representatives and the Senate held today are seen as popularity polls for the president, and can determine the economic course of the largest economy in the world. They also come after a year-long rally on the stock markets. The S&P 500 index experienced the worst month since 2011, while the AEX lost about 6%.

Professional investors have worked hard on unlikely scenarios: what if the Democrats manage to get the majority in both the Senate and the House of Representatives? Or vice versa, if the Republicans manage to retain their majority in both chambers? 'If there is a new round of tax cuts, the Fed will probably raise interest rates more often', says Mary Pieterse-Bloem, Professor of Financial Markets at Erasmus School of Economics and Global Head Fixed income in the Global Investment Center of the Private Bank of ABN AMRO. ‘It is expected that the impact of the first round of tax cuts will be worked out halfway next year. But with new tax cuts, the Fed will probably raise interest rates more often.’

The entire article (in Dutch) of Het Financieele Dagblad can be found below, 6 November 2018.