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It’s official: Republican candidate Donald Trump has won the US presidential elections.
Coupled with the growing likelihood that Republicans will also control both the Congress and Senate, Trump is in a good position to push through with plans to reduce taxes and increase government spending, which would be good for US economic growth.
Prospects of faster growth allowed the US market to rally strongly last week, with the Nasdaq and the S&P 500 closing higher by 5.7 percent and 4.7 percent, respectively, to new record highs.
Unfortunately, a Trump victory is not good for Philippine stocks. Despite the strong performance of the US market, Philippine stocks fell during the same period, with the Philippine Stock Exchange Index (PSEi) down by 2.3 percent.
One of the major negatives of a Trump presidency is his plan to impose tariffs of 60 percent on all imports from China and up to 20 percent on goods from other countries. This would significantly hurt exports.
Although the Philippines is not an export-dependent country, investor sentiment toward Asia would be negatively affected given the region’s heavy dependence on exports.
Interest rates are also expected to stay elevated. One of the reasons for the steep rise in the US 10-year bond rate to 4.3 percent recently is expectations that Trump would win the elections.
Higher tariffs on imports plus stronger economic growth are expected to push up inflation, potentially causing the Fed to slow the pace of its rate cuts.
