What If Donald Trumps?

The potential election of Donald Trump as president in the U.S. carries significant implications for the Indian equity market. It could lead to changes in the global trade dynamics, in particular affecting the Indian IT sector while also raising inflation levels and leading to yet another revision in the visa programme for Indians who want to work in the US. The article takes a closer look at what may lie in store

Politics and economies are deeply intertwined, and when it comes to elections in the United States, the epicentre of the global economy, the stakes are even higher. The upcoming U.S. presidential election in November will significantly impact the global markets and various asset classes, including equities, commodities and currencies. This election holds particular importance given the current state of the world economy and geopolitical conditions. Over the past few years, inflation has been a dominant topic in economic discussions.

In India, inflation was a core issue during the recent election, contributing to the incumbent party's inability to secure a majority on its own. Similarly, inflation remains a key political concern globally, and the U.S. is no exception. The current administration, led by Democrat Joe Biden, has touted the strong U.S. economy, low unemployment rates and significant progress in combating inflation. However, this narrative often fails to resonate with supporters of Donald Trump.

While the Republican Party, also known as the GOP (Grand Old Party) blames Biden for lingering inflation, Trump's proposed policies could potentially reverse the Federal Reserve's hard-fought gains. This is coming at a time when the Federal Reserve is widely expected to cut interest rates in September, buoyed by growing expert confidence that the end of the rate hike cycle is near. The Federal Reserve's preferred inflation gauge has eased to 2.6 per cent, approaching its 2 per cent target, and the once-overheated labour market has cooled to the pre-pandemic levels.