The Trump trade

Trump has told us what he will do. Believe him.

The economic and market implications of a Trump victory in the US Presidential election have come into sharper focus following last week’s debate between the two candidates. Before Trump’s ascendency in 2016, I would have maintained that US Presidential elections in themselves did not have major tradeable macroeconomic implications, not least because the US system of checks and balances was a constraint on any change in US domestic or fiscal policy. Monetary policy would still be conducted by an independent inflation targeting central bank, providing a more or less strong anchor for aggregate demand, interest rates and the exchange rate. The direction of fiscal policy is hard to call given Executive-Congressional interactions and is effectively discounted by monetary policy, at least in the short-run. That is not to suggest that changes in public policy don’t have long-run effects, but it is hard to position for those.