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Tuesday 24.01.2017 | Name days: Krišs, Eglons, Ksenija

Outcome of presidential elections in USA changed financial market’s situation

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUFinancial markets have reacted to both the Brexit referendum in favour of British exit from the European Union and the unexpectedly big Republican victory in the US election with a restrained calm, after initially dramatic price movements.

The lengthy crisis in the commodity sector has made investors gradually more cautious, which partly explains why the Brexit vote and the US election did not result in a need for further caution. Furthermore, neither one of these events is being interpreted as detrimental to medium-term economic growth, according to the December 2016 issue of SEB’s quarterly Investment Outlook report.

The world’s economic growth could become stronger. Bigger fiscal stimulus and tax cuts in USA could potentially provide a much needed momentum, SEB experts predict.

«Donald Trump’s promises to invest in infrastructure and reduce taxes could increase economic growth for a short while. Realization of political decisions, however, requires time. Because uncertainty is high now, changes to US policy could have both negative and positive consequences. For example, new security measures in the US interior market could potentially impact international trade, whereas the stimulating influence of the country’s expansive fiscal policy could turn out larger than expected. Nevertheless, the growing level of economic activity in USA, Europe and China offers reasons to expect good tidings,» – explains SEB Private Banking investment strategist Ingus Grasis.

According to data from SEB experts, profit growth indexes of publicly quoted companies continue to improve. Although profit growth outlook for 2017 may be exaggerated, it is expected that it will be positive. Powerful macroeconomic data provides tactical support to profit outlooks. In regards to bonds, experts predict speculative credit rating bonds will become more profitable than government and investment bonds in the next twelve months. At the same time, the currency market is the only field in which the biggest influence will be held by political events, not economic factors.

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