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Despite a global market slump following Donald Trump’s triumph in the US presidential race, ANZ Chief Economist Richard Yetsenga says this will not necessarily be the negative event many are expecting even though it reigned in the prospects of the Fed raising rates in December.

“It’s important to remember this is not an unambiguously negative event," Yetsenga told BlueNotes on video. "This is not like Brexit in the UK earlier this year. Brexit was clearly an event that had substantial negative economic costs and probably political costs as well.

" It’s important to remember this is not an unambiguously negative event."
Richard Yetsenga, ANZ Chief Economist

“Markets have reacted negatively because there is a lot about Donald Trump we don’t know. He has never held elected office, he doesn’t have a voting record, so the way he behaves initially is really important in how the next couple of days and week’s transpire.”

Richard Yetsenga speaks to BlueNotes following Trump election in US

“Markets initial response has been to take the equity market down substantially, currencies which are perceived to be affected by some of Trump’s policies like the Mexican Peso also are substantially weaker.

“The prospect of a Fed hike in December has also been pared back – that was as high as 90 per cent over the last couple of days, and now it’s much closer in market pricing to a coin toss.

“The reality is we will have to see how President Trump behaves compared to Candidate Trump. I mean exactly his turn of phrase and how he treat the media and the rest of elected government in congress and the senate will be important."

Yetsenga said this surprise result adds to a trend of political upsets across the world.   

“We’ve had Brexit this year, Trump’s rise, sustained candidacy and now election as US President, we had the election of Duterte in the Philippines, and we also had close to a hung parliament in Australia. There is clearly a pattern of political surprise across elected democracies this year.”

Richard Yetsenga is Chief Economist for ANZ.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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