The results of the election on Tuesday, which gave the Democrats control of the House of Representatives and allowed the Republicans to preserve the Senate, two years after Donald Trump was elected president, will probably have subtle but not insignificant effects on the US economy in the coming months.
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The immediate financial market verdict was positive, as the S & P 500 index rose 2.1% on Wednesday, while the dollar and government bond yields with a 10 year maturity changed little.
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These are five areas to consider:
Durability of the extension: Irrespective of the change in power in Washington, the United States expansion, which has been going on for nine years, seems to lead to the collapse of the biggest record in mid-2019. The projections of the huge changes in economic dynamics since the previous elections – Nobel Prize-winning economist Paul Krugman predicted a "global recession" after the 2016 elections and then withdrew – it turned out to be wrong.
The mood of the consumer: Economic consumer confidence tends to reflect the fate of their candidates: Republicans feel more optimistic after the election of Terbu, while Democrats were less optimistic. Now these trends can be reversed and increase overall confidence. "There is an asymmetrical reaction," said Justin Waring, an investment strategist at UBS Group AG in New York. the winning side sees a bounce three times greater than the deflected side. "There is evidence that trust and optimism are self-sustaining prophecies because they enhance spending and investment decisions," so spending could increase slightly.
The optimism of the companies: Business confidence, on the other hand, could be affected. The optimism of small businesses has increased especially since the election of Trump, according to a survey by the National Federation of Independent Businesses.
Investments: The expansion of the trade war with China also adds uncertainty. Trump has gradually imposed taxes on $ 250,000 million in Chinese products and said he would assess the addition of $ 267,000 worth of goods to the list. The United States also applies tariffs on imports of steel and aluminum from some of its main trading partners.
In total, it imposed tariffs or threatened to do so for almost all products from China, which responded with taxes to almost all American products that had entered the country.
Tax adaptation? Former President Bill Clinton has found areas of co-operation with the Republicans, as his party suffered a fallback in lawmakers. If Trump and Democrats work together, they could find agreement points that will increase spending, including infrastructure, said Sassan Ghahramani, Managing Director of SGH Macro Advisers. Ghahramani predicts "another big boost in budget spending". There could be a "real pain" in 2020 with the end of fiscal stimulus and a possible trade war with China, said Diane Swonk, chief economist at Grant Thornton LLP in Chicago. "There could be a double impact of fiscal policy that slows growth and increases the risk of a full recession," he added.