US Elections: We are heading into a world of unprecedented political risk - Fidelity

Dominic Rossi, Global CIO Equities, Fidelity International, comments on likely Trump victory in the US presidential elections.

Key Quotes

"We are heading into a world of unprecedented political risk which calls into question the pillars of the post WWII settlement. It’s unsurprising investors are heading for cover.

“The immediate sense of bewilderment at the shift rightwards in American politics will need to give way to a more sober risk assessment.

“The immediate impact will be on the Fed. The probability of a hike in interest rates in Dec, followed by two further hikes 2017, has fallen sharply. The dollar which has been trending higher in anticipation, has consequently reversed. Both were threats to the bull market, and these have now been postponed. Monetary policy will remain accommodative.

“However, these known financial risks have been displaced by an unprecedented level of unknown political risks. We can only speculate whether Trump will follow through on his more protectionist slogans with substantive policies. Investors, particularly those overseas, will stand back and wait.

“Republican control of both Houses offers an opportunity to break the political gridlock of recent years in domestic areas of policy. There will be an eagerness to roll back many Obama initiatives, above all Obamacare.  

“But none of this will convince investors in the short-term.”