Clinton or Trump? It does not make a difference.

No significant change in the American economic policy is expected, so the results of the presidential elections will not affect the stock exchange either. Economists at Nomura recently published a study on the feasibility of the programmes of the two competing presidential candidates. Joseph Song, Vice President and economist at Nomura Securities says that the president and the legislation will keep tying each other’s hands in the coming years as well. However, there are certain things we can expect: if Trump wins, then at the beginning of his presidency, American GDP will grow less, than it would if Clinton won. At the end of the cycle, the tendency would be the opposite, regardless of the winner. In the short term, under Trump’s presidency, import and – indirectly – export prices would go up, so Fed would have to increase interest-rate faster, while in the case of Clinton’s victory, the situation would be calmer in this regard.

Péter Zentai: Around the world, people are concerned, because the chance of Dunald Trump winning is increasing; meanwhile, the leaders of certain countries would ‘crack a bottle’ if he won. From an economic-financial-captial market point of view, which one is appropriate: fearing or looking forward to it?

Joseph Song: The major figures at Wall Street start to believe that the result of this year’s presidential elections will be a nonevent – at least in terms of capital markets and the economy.

What is the foundation of this new attitude? Surely, it was no coincidence that the whole Wall Street supported Hillary Clinton a couple of months ago.
If we take into account Clinton’s seemingly straightforward and Trump’s malleable economic policy programmes, and consider them in the light of the legislation, we can see why the neutral position of Wall Street is reasonable. The main message of our recently published study is that there is no significant change expected in economic and financial policies as a result of the elections. It can only cause short term, radical developments.

But you assume that Hillary Clinton will win…
We still believe that she has better chances to win. However, it is also quite likely that the House of Representatives will be controlled by republicans. If we assume this is going to be the case, we can expect that this stalemate, which has been going on for six years in Washington, will persist: the president and the legislation can and will block each other in issues of major importance. They will keep tying each other’s hands. It is not likely that any of the candidates will be able to fully execute their programmes due to the strong constitutional checks and balances.

Even if Donald Trump wins?
We have to admit, his victory could cause changes that would fundamentally change American and world trade – if the House of Representatives remains in republican hands. This scenario is just as probable as Hillary Clinton’s victory starting an avalanche, bringing the House of Representatives under democratic control. In this case, there would be significant changes as well. According to the most probable scenarios, in case of Clinton’s presidency, the federal budget would spend one and a half trillion USD and tax revenue would increase by about one trillion in ten years. Trump would increase budgetary expenditures by one trillion – within ten years -, but tax revenues would decrease by three trillion.

I would expect the biggest differences in the labour market.
It is likely that – taking account of the expected development of domestic policy – Clinton would integrate about two and a half million immigrants into the labour market in five years. However, if Trump wins, the significance of workforce from abroad would drop substantially. Under his presidency, a fundamental change would be that import prices would probably go up by 15% (due to planned administrative barriers). However, the rest of the world would counter these actions by increasing the price of American export by the same amount.

What does it mean for central bank policies?
Monetary tightening – for certain. In case Trump won, Fed would intervene sooner and more radically (increasing interest-rates). It could cause the dollar to become stronger, which would lead to stock exchange crashes. Clinton’s victory would mean less radical actions from central bankers and capital market operators.

Original date of Hungarian publication: September 12, 2016