More punitive US tariffs on China would benefit ASEAN manufacturers as they become an alternative in the supply chain. However, a long-term decline in global trade poses a challenge for Singapore, potentially impacting its position as a major trading hub, Paul Chew, Head of Research at Phillip Securities Research, says in an interview with finews.asia.
Paul Chew, why is the US presidential election so influential on the global economy?
The US accounts for a quarter of the global gross domestic product (GDP) and is a major stimulant to global demand with an annual trade deficit of $800 billion.
More critically, the US shapes global monetary policy, as domestic inflation influences worldwide interest rates. Additionally, its extensive military presence and influence have a significant impact on global geopolitics.
Based on past experiences, how have the markets reacted to the results of the presidential elections?
Historically, markets tend to react with volatility immediately following presidential elections due to uncertainty around potential policy shifts. There is often an initial «knee-jerk» response as investors weigh the implications of the new administration’s proposed policies.
However, this reaction usually stabilizes over time, often within a few months to a year, as clearer policy directions emerge and markets adjust accordingly. The clear win by President-elect Donald Trump tapers down the tail risk of any disputes or contentions regarding the election outcome.
Do we expect the recent elections to bring short-term or medium-term volatility to international markets?
Expectations that the Trump administration will expand the US fiscal deficit could support US growth but may also drive inflation, leading to higher bond yields.
This is due to a likely increase in bond issuance to fund the deficit and rising inflation expectations, which could impact Asia's bonds and equities as investors adjust to a stronger dollar and higher global interest rates. Markets will also factor in the potential volatility of Trump’s future trade, immigration, monetary, defense, and fiscal policies.
How will Singaporean investors, generally, be impacted by this market volatility? Will it be isolated within the US, or will we see cascading impacts in Singapore too?
The US presidential election significantly influences financial markets in Asia and Singapore, particularly through currency movements and shifts in portfolio flows.
In the near future, Singapore equities will continue to be influenced by major markets like the US and China. Singapore investors face a mix of opportunities and challenges due to the implications of US election results.
What are the potential opportunities and challenges Singaporean investors may face navigating these markets?
If we assume structural inflation is underway in the US, higher bond yields or a steeper yield curve would generally be positive for Singapore banks.
Additionally, more punitive tariffs on China would benefit ASEAN manufacturers as they become an alternative in the supply chain. However, a long-term decline in global trade poses a challenge for Singapore, potentially impacting its position as a major trading hub.
Paul Chew is the Head of Research at Phillip Securities Research, based in Singapore.
