Donald Trump will be the next president of the United States, with his broad-based gains in the popular vote translating to a strong Electoral College victory. 

Republicans have flipped the Senate, with the eventual majority likely to be between two and five seats. 

The Republicans look extremely likely to also win the House, granting the party unified control of government.

In this red wave outcome, the scenarios we have previously called “Trump delivers for markets” and “Full fat Trump” will come to the fore, as congressional control would give Trump latitude to pursue tax cuts and deregulation. 

But if Trump finds it more difficult to push a large increase in the deficit through Congress, then the focus could be more on tariff policy, with a “Trump trade war 2.0” scenario more likely. Trump has significant executive authority to set tariffs without the need for congressional approval. 

On balance, Trump’s agenda is likely to lead to higher nominal GDP growth. Tax cuts could boost aggregate demand, but as the economy is at full employment, this may not boost real growth over the medium term. 

This will likely see the Fed cut rates more slowly than it otherwise would have done, which, combined with higher debt issuance and inflation, risks putting further upward pressure on US and global yields. 

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