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ANALYSIS: Weighing up White House risk

However, Hermes Investment Management head of emerging markets Gary Greenberg disputes that a Clinton presidency has the same negative implications for trade as a Trump presidency.

Clinton may talk tough on trade policy, said Greenberg, but under her presidency, it would most likely be ‘business as usual on trade.’ As such, trade wars under president Clinton seem improbable to Greenberg.

One of the dismal scenarios Greenberg envisions under President Trump is an aggravated trade war between the US and China, which “would lead to significant losses for both economies” and injure emerging market stocks and currencies.

“Markets outside the US would not celebrate a Trump victory,” he asserted. “Global bond prices would likely tumble due to his willingness to countenance a budget deficit of 10% of GDP, and stocks would follow suit as investors discount the threats of new tariffs, an exit from the WTO and a trade war with China.”

“The deficit and trade war could lead to higher interest rates and a stronger dollar, neither of which are associated with strong emerging market stock markets or currencies. If yields on US treasuries rise, those on emerging market sovereign debt would also climb higher. Trump’s bombastic politics may be ugly, but the economic consequences of him governing the world’s largest economy would be worse,” Greenberg concluded.

Whether Clinton or Trump emerges victorious next Tuesday, Wednesday seems set to be a lively day in financial markets. 

Kristen McGachey

Kristen joined Last Word Media and the world of financial journalism in April 2016, leaving behind a career in a legal publishing firm as a senior researcher turned assistant editor. This native Angelino...

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