Our chief strategist’s commentary on US election

Some quick thoughts from our chief strategist, Dustin Reid, on the US election on what we know at 8 a.m. ET:
 

• We do not have all of the election results, but it appears that Trump has won the Presidency, the Republicans have flipped and won the Senate; the House is too close to call
• Trump’s win has been significant; he won by improving his share in almost all electoral-sub categories, and maybe just as convincingly by winning the popular vote which few expected; a Republican has not carried the popular vote since 2004
• The Senate, while looking under Republican control, is still unsure of the majority; a 52-48 Senate is very different for policy than a 55-45 Senate because of some of the senators who are part of the Republican majority from Maine, Alaska and Utah are very anti-Trump
• The House could not be any closer; regardless of what happens, it appears whoever controls the lower chamber will have no more than a 220-215 majority and it could be 218-217; which party wins of course counts because that party will control the Committees and tax policy will come from the House
• Equity markets are cheering the results with most of the US indices indicating fresh all-time highs in the futures market and likely in the cash market open later this morning, in part on the hope of strong nominal GDP growth and a cut in the corporate tax rate
• Fixed Income markets are not cheering the results with yields significantly higher on concern of a Trump tax & spend policy agenda
• The USD is cheering the results and is significantly higher versus almost all global currencies on the notion the Fed might have to slow its easing cycle somewhat based on the US imposing tariffs that cause domestic US inflation to rise
• We would expect tariffs on China, slowing immigration, and a pro-fossil fuel energy policy to be some of the major policy starting points for the incoming administration when it comes in on January 20, 2025; depending on how Congress comes together, Trump will not be shy to use his Executive Order powers
• Also important will be the so-called “Trump tax cuts” from his first Presidency which are expiring regardless in 2025; this is major piece of legislation that will include any corporate tax cuts
• USMCA is due for a “review” in 2026; it could come up in early 2025, but it is not as likely to be at the beginning of the agenda, potentially more of a second-half of 2025 event
• We think Trump will feel emboldened by these results and will not be shy in pushing his agenda; besides getting the conclusion in the Congressional races, also important here will be who Trump looks to as Treasury Secretary as well as the US Trade Representative; given the significant outcome for Trump there is a growing possibility he could install hawkish personalities
• With the results in the US, it appears more likely on the margin that Canada will be somewhat more comfortable electing a leader from the Conservative Party when the election does take place