US elections matter to the Philippines

With only one day to go before the US presidential election, the markets are starting to get jittery.

- WILSON SY

The Nasdaq 100 fell by 2.5 percent last Thursday while the S&P 500 dropped by two percent. Even the Philippine Stock Exchange index (PSEi) declined by 1.9 percent as investors brace for what could be a pivotal election for global markets. The US markets recovered some ground last Friday, but investors expect more volatility in the days following the election.

US policies shape global economy The heightened nervousness is understandable - the next US president's policies will have global implications. The US remains the world's largest economic and military power, with the biggest capital markets (a $55-trillion stock market and a $27-trillion Treasury market), and leading oil production at 13.5 million barrels daily. Through the Federal Reserve and the dollar's reserve currency status, it wields unmatched influence over global finance and trade.

Impact on the Philippine economy For the Philippines, the outcome of the US elections is important because changes in US economic, trade and fiscal policies may affect global inflation and interest rates. These influence domestic interest rates and the peso-dollar exchange rate. They may also impact local consumer prices, borrowing costs, stock market valuations and foreign investment flows.

Key policy issues to watch With global implications at stake, the key policies that investors are keeping an eye on include:

1. Tax policy - Harris is proposing additional taxes on high earners (for those making over $400,000) and large corporations to fund social programs. She also plans to tax unrealized capital gains for individuals with net worth exceeding $100 million. In contrast, Trump wants broad tax cuts and the extension of his 2017 tax reductions. He claims that economic growth and tariffs will offset costs.