US: Markets going to get impacted by fiscal reform - Rabobank

Mingled with the theme of central bank activity, political issues are unlikely to stray far from the headlines next year as the market will be grappling with a wide spread of estimates regarding the impact of fiscal reform in the US and the implications for the mid-term elections in November 2018, suggests Jane Foley, Senior FX Strategist at Rabobank. 

Key Quotes 

“In addition, trade and protectionism headlines are likely to be in clear view.  This week alone the US, Japan and the EU joined forces at a WTO meeting to eliminate unfair competitive conditions caused by subsidies, state-owned enterprises and “forced” technology transfer from foreign firms.  Although China was not named, it was the supposed target.  Meanwhile, finance ministers from France, German, Italy, Spain and the UK warned the US that parts of its anticipated tax reform were at odds with WTO rules and the US’s own tax guidelines.”

“There are concerns that a series of tax measures are aimed at increasing the tax burden of foreign companies opening in the US.  Keeping with the trade theme, there are two rounds of NAFTA talks scheduled for Q1.”