Monetary policy

Upbeat global earnings are confirming that the benefits of reflation ? rising wages, growth and inflation ? are spreading beyond the U.S. We see room for more upside for corporate profits, especially in Europe and Japan.

Global uncertainty to remain as election result signals further rolling back of globalisation themes, with emerging markets likely to see greatest impact. For the US, the Republican sweep in both houses will facilitate Trump’s agenda with a focus on domestic growth, spending and fiscal stimulus.

It’s Brexit all over again. The surge in anti-establishment sentiment is definitively global. Brexit can no longer be dismissed as a freak event. It is a trend. Donald Trump has won, by defying his party, the media, and conventional politics. Populism is coming to power. The critical issue now is what this mean in practice.

The Fed should maintain its data-dependent normalization course with a rate hike likely mid-December 2016. Fed fund futures signal the market has not changed its mind on the Fed staying dovish in 2017. Janet Yellen’s four-year mandate as chair of the Board of Governors will last until 2018.

The votes are in and it is clear. For the second time in 2016 we have had a major rejection of the political status quo. Following on from the shock UK referendum result, a Trump victory is further evidence that many believe that we have reached peak globalisation and income inequality.