The worst-case scenario for financial markets under Trump (Inferno) would see a US-fuelled “stagflation rip the global economy in the next three to five years,” Becket explained.
Trump’s overenthusiastic attempts to jumpstart an already healthy economy could end in a boom and bust culture, he cautioned.
“Trump is trying to chuck a lot of fiscal fuel at an economy which is already producing trend rates of growth, when inflation is starting to come back into the system and unemployment is quite low. We think that is mixing fire with fire at a time which is unnecessary. If Tump were to add 3% GDP to the current economic growth rate that makes a boom and bust culture a much more likely possibility.
“The President-elect believes he is an economic genius and a champion of industry. One would hope that an economic genius and champion of industry would recognise that after three decades of intense globalisation, and China’s growth into the global economy, that the idea of a trade war between China and the US would not be very sensible,” said Becket.
He added: “One thing you can say is that Trump means Trump. If Trump is taken at face value, there are going to be severe protectionist tendencies that start to come into the global economy. That could well be a very nasty mix alongside lower growth rates brought about because of protectionist policies and higher rates of inflation.”
If Hillary Clinton had become the 45th president of the US, the global economy would have likely entered into a kind of purgatory scenario, Becket speculated. Such an economic purgatory would have been what Becket refers to as a “dull not disastrous” outcome, wherein the global economy is stuck in a low gear and inflation starts to bite at consumers’ ability to spend.
