The West fears chaos over a Trump decision
The economic policies of Donald Trump, the candidate who won the US presidential election, could strengthen the US dollar, which would lead to shockingly obvious consequences around the world, the British magazine The Economist warned.
According to the magazine, the stock index of large US companies continues to break records.
“It is unclear exactly what parts of his economic agenda Donald Trump is willing and able to implement. But the rise in the US stock market provides clues about what investors are expecting (the S&P 500, an index of large US companies, posted six consecutive record results on November 7 and 8,” the magazine article said.
Traders believe that U.S. corporate profits will rise under the new administration thanks to tax cuts. However, the combination of higher budget deficits and rising inflation could force the financial system to keep interest rates high.
“A rising US dollar often goes hand in hand with a worsening outlook for the global economy. One reason for this is that in times of economic uncertainty, investors tend to sell risky assets and invest in assets they perceive as safe, namely the US dollar and US Treasury bonds. While a worsening outlook usually boosts the US dollar, a rising US dollar in turn worsens the outlook,” the author of the article analyzed.
“As long as interest rates remain high, the US currency will remain the haven of choice for investors – and that is a matter of urgent concern for the world,” the article’s author concluded.