Schroders on US elections & impact of global monetary policy

Less than 50 days remain until one of the most highly contested elections in the United States, with potential ramifications for the global economy and financial markets. Investment group Schroders recently posed the question of whether Trumponomics could exceed Harris' social stance in a note. Sebastian Mullins, Head of Multi Asset and Fixed Income at Schroders Australia, shared insights on the possible impacts of the US presidential debate and the candidates' policies on the markets. Mullins highlighted that the recent debate between the candidates did not seem to sway swing voters significantly. While Harris was perceived to have performed better than expected, neither candidate managed to change the minds of their core supporters or undecided voters. Polls indicate that Harris is currently ahead of Trump, but betting odds suggest a closer race. With two months remaining until the election, Mullins emphasized that much can still unfold, citing recent incidents like an attempted assassination of Trump as examples of unforeseen events. Regarding Trumponomics, Mullins pointed out that a Trump victory would likely bring back his signature policies, despite Harris' movement towards some of Trump's positions. Trumponomics includes measures like tariffs, immigration restrictions, energy regulation changes, and financial sector reforms. Trump's proposed tariffs, especially on China, could lead to increased inflation, while his immigration policies might impact labor supply and wages, further contributing to inflation. Additionally, Mullins addressed Trump's evolving stance on Bitcoin, noting the President's efforts to appeal to crypto supporters. Trump's pivot towards cryptocurrencies could influence voter perceptions but might not necessarily result in long-term support for Bitcoin. The conversation then shifted to the Federal Reserve's upcoming decisions on interest rates, with Mullins predicting a 25 basis point cut in the Fed's next meeting. He highlighted market expectations and the potential impact of rate cuts on inflation, observing that a Trump presidency could lead to a more hawkish stance from the Fed compared to a Harris administration. In the face of market uncertainties, Mullins emphasized the importance of monitoring the Fed's actions and the bond market's reaction. Any significant deviations from expected rate cuts could signal concerns about economic growth or inflation, prompting adjustments in multi-asset and fixed income portfolios. As Mullins concluded the interview from Cape Town, South Africa, he underscored the need for cautious policymaking in the midst of complex macroeconomic dynamics. The global economy braces for a period of volatility and shifting market sentiments as the US election draws nearer.