#Trumpnomics. Implications Alberto J. Bernal, Chief EM And Global Strategist, XP Securities Inc, NYC, Miami
This Was Not Supposed To Happen. But It Did #Trumpnomics 2 Presidential Trump Candidate Trump Year-End 2017 SPX, 2,350 BRL $3.4 MXN $20 COP $3,200 10-Y UST, 2% Bovespa, 65k Mainstream Republican Administration. Year-End 2017 SPX, 1,700 BRL $4.5 MXN $25 COP $4,000 10-Y UST, 1% Bovespa, 45k Massive Trade War World, Recession Likely.
The Good News For Latam From A Trump Administration A USD $500 Billion infrastructure program will likely help to keep commodity prices supported (good news for commodity exporters, i.e. Brazil, Colombia, Peru, Chile, Argentina). The very likely decision by the Trump administration to reduce individual and corporate taxes will likely increase consumption and private investment in the US. Some spillover effects will be felt in the Emerging Region. It will prove impossible to change world-wide supply chains in just a few years, so if the tide rises, it will lift all boats. 3
The Bad News For Latam From A Trump Administration Trump is an isolationist by heart, and that will not change. Circumstances may force some amelioration on his ideological leanings, but NOT a change. There is no chance that globalization will be accelerated under a Trump administration. At best, it won t be rolled back aggressively. The situation of Mexico is very complicated. US companies will see material backlash if they continue to invest in plants in Mexico. Growth will slow materially. The Latam region will see a material reduction in US FDI under all logical circumstances. The threat of protectionism and increased FDI are simply mutually exclusive concepts. Interest rates may increase more than expected in the US, and that will generate pressure in fiscal and external accounts financing in the Latam region. 4
We All Have A Trump In Our Family. 5
Bottom-line, An EM Repricing Will Take Place, Regardless. This Is A New (Much More Difficult) World. #Trumpnomics #Hillarynomics 6
But Some Things WILL NOT CHANGE: The New Economy Generates Fewer Jobs.GE 333k Employees; Apple, 76k; Alphabet 61k; Facebook 16k; WalMart 2.1 Million.. Number of employees of the largest S&P 500 market-cap companies as of 2001: 3,051,000 Number of employees of the largest S&P 500 market-cap companies as of 2016: 535,000 7
Inflation May Increase Somewhat More In A Trump World, But We Are Not Going Back In History. 8
Inflation May Increase Somewhat More In A Trump World, But We Are Not Going Back In History. 9
JAPAN FACT CHECK Is There Really Any Risk Of Japan Being Able To Taper Policy? Will Inflation Accelerate? 10
EUROPE Will The ECB Prove Able To Push Inflation Up Materially In The Short-Term? What About The Trump Effect? 11
The Future
Lingering High World-Wide Liquidity Levels Will Continue to Generate Good Support For Asset Prices 13
We Are Still Betting On A Meanigful Rebound In Commodities -- Because They Look Cheap, And Because China Is Looking Better. 14
Still Betting On A Material Rebound In Oil Prices (Because Of Fundamental Supply And Demand Issues). 15
Still Betting On A Material Rebound In Oil Prices (Because Of Fundamental Supply And Demand Issues). 16
Still Betting On A Material Rebound In Oil Prices (Because Of Fundamental Supply And Demand Issues). 17
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