Market Updates

Donald Trump, the 47th president-elect of the USA, has been given a strong mandate. He won both the electoral college and popular vote, while his Republican party secured a majority in both chambers of Congress.

Although not yet fully certified, Trump has secured a clearer victory than initial polls indicated. The election resulted in a ‘Red sweep’, with a Republican majority in both chambers of Congress.

It’s still impossible to predict who’s going to be the 47th US President as Americans head to the polls on November 5th. However, since October, the odds of a Donald Trump win and Republicans winning both chambers of Congress have risen, with Kamal Harris narrowing the gap over the weekend.

Last week was quiet, with no significant economic data releases, so markets continued to take cues from the US election polls. The US dollar rose and bonds declined. Surprisingly, stocks fell. It’s hard to attribute these dynamics to a single event. Trump had earlier taken a slight advantage in the polls in all swing states, though still within the margin of error, but his advance faded last week.

Last week, the European Central Bank (ECB) cut interest rates by 25 basis points (bps) as inflation fell below the 2% target in September and growth remains sluggish. While not pre-committing to more cuts, ECB President Lagarde’s communication hinted that more could be on the way, given growth worries.

After three weeks of positive performance, the key equity indices ended flat to marginally higher in the US and fell in Europe last week for two reasons: First, escalating Middle East tensions sent the price of risky assets lower while pushing oil prices higher. Second, better-than-expected jobs and services data out of the US led markets to no longer expect a big rate cut in November.