Trump Era Begins: What it means for global markets and Indian economy
volatility return across asset classes, as one would have expected with Trump winning the US presidential election and Republicans taking control of both the House of Representatives and the Senate.
The latest economic data suggests that the US economy is resilient. It will be interesting to see whether the Fed cuts rates again in the December policy or pauses. The progress on the inflation front has stalled and given that Trump's policies are likely to be expansionary, there could be upside risks to inflation.
The US Fed may therefore opt to wait and see how the inflation dynamics evolve. The market is pricing in an 86% chance of a 25bps rate cut in the December Fed policy, which is up from 64% a month ago.
Eurozone and Chinese economies continue to exhibit weakness on the other hand. The European Central Bank (ECB) is expected to cut rates by 25bps this week and China is likely to impart further fiscal and/or monetary stimulus in early 2025. There is a possibility that the Bank of Japan may not hike next week.
Therefore, there is definite growth divergence between the US and other economies and that could translate into policy divergence as well. This has caused the Dollar to strengthen against most major currencies.
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