On the heels of Brexit, Donald Trump's election to the presidency of the U.S. marks the second significant populist outcry through the ballot box. Although we are concerned about Mr. Trump's rhetoric on free trade and other policies, we believe that some of the positions expressed during the campaign may ultimately benefit U.S. economic growth. The immediate pronounced downward move across risk assets, however, denotes justifiable uncertainty, as do now diminished expectations that the Federal Reserve (Fed) will raise rates in December. The weeks and months ahead will be critical to determine and analyze policy priorities as an administration is assembled and lines of communication with Congress are established.
Flight to Quality Dominates Overnight Trading
In the near term, policy uncertainty will weigh on risk assets, including U.S. equities, high-yield corporate credit, and even investment-grade corporates. Perhaps most acutely impacted will be emerging market stocks, currencies and sovereign debt. However,…