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The return of Donald Trump to the White House opens the door to a wide range of shocks for emerging markets, both positive and negative.
Chinese policymakers announced a RMB 10 trillion debt swap, providing some breathing room for cash-strapped local governments. Additional support for consumers and businesses should eventually arrive, not least because stimulus will be necessary to offset another trade war under President Trump. But the focus on derisking and shoring up balance sheets may continue to disappoint market expectations for big stimulus.
Markets are focusing on the reflationary aspects of Trump’s agenda. This has meant a stronger dollar, higher yields, US equites up, and oil lower. But these moves may evolve as different aspects of Trump’s economic agenda shift in and out of focus. Higher nominal GDP growth and higher-than-otherwise interest rates are the macro implications we are most confident about for now.
Join Macro Bytes to dissect the US election results, Trump's policy agenda and its market implications, with expert insights from the team
New fiscal rules, elevated taxes, higher government borrowing, and boosts to public expenditure. As financial markets assess these changes, discover our perspective on the UK budget and its potential impact on growth.