Key takeaways
With a divided Congress, we should not expect changes to economic policy and hence we maintain our view that the implications for the economy and markets should be limited. US expansion is set to continue.
Trump has criticised the Fed but it is likely to continue its hiking cycle by hiking once more this year and three times next year.
Democrats likely to start impeachment process but Trump is unlikely to be convicted.
We expect Trump to remain hawkish on foreign policy. Positive signs in US-China trade war lately with a 60% probability of a ceasefire.
The result is not a game changer for G10 FX markets. We still look for EUR/USD to move below 1.13 before year-end.
Limited impact on US fixed income markets. We still expect 10Y UST to move towards 3.5% in 3M-6M.
In our view, macro and monetary policy are more important for equities than politics. We are still positive on US equities.
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