What Happens After The Presidential Election?
b"With Mohamed El-Erian, Bloomberg View columnist, Chief Economic Advisor at Allianz, and Chairman of President Obama's Global Development Council
How will the election results affect the stock market and your financial future? With less than one week to go, that\\u2019s a question many people are asking these days.
As a Bloomberg View columnist, Chief Economic Advisor at Allianz, and Chairman of President Obama's Global Development Council, Mohamed El-Erian is particularly qualified to sort out the possible scenarios.
Mohamed believes that the impact on markets will be relatively limited if Clinton wins and Congress remains split since, as it\\u2019s been for the last eight years, getting anything passed will still be difficult.
Disruption occurs, however, under two scenarios:
* Trump wins and goes forward on his trade proposal and begins slapping tariffs on China and Mexico.
* Clinton wins and the Democrats gain control of both houses of Congress, indicating more government involvement and higher taxes.
What the Increase in The GDP Means For The Economy
Referring to something more quantifiable, Mohamed points out that the Commerce Department just released a GDP increase of 2.9 for the 3rd quarter, showing the economy rebounding stronger than in the first 2 quarters and indicating we\\u2019ll be in the range of 1.5-2% for the year as a whole. Higher business investments and more exports have contributed to these higher numbers, but, according to Mohamed, we are \\u201cwell below what we are capable of if only Congress were to get its act together and step up to its economic governance responsibility.\\u201d
According to Mohamed there is so much cash on the corporate balance sheets that Congress could unleash without even having to make a \\u201cbig bang policy announcement\\u201d, but instead by acting on four particular areas:
* Implementing a set of pro-growth structural reforms aimed at the loopholes, exemptions, and ad hoc changes that have rendered our tax system anti-growth.
* Increase spending on infrastructure.
* Retooling our labor market and education reforms.
* Improving global policy coordination with the US playing a leading role.
On a cautionary, but positive, note, Mohamed says that combining the better GDP number with a more robust labor market could help us move forward economically, with the Fed most likely hiking up interest rates in December to reflect these more promising figures. That is\\u2014unless the election results cause disruption.
Can Congress and The American People Come Together Post Presidential Election?
But it\\u2019s not only the stock market that will be affected by the election results; whoever wins this November must bring a divided Congress and country together
Mohamed says that \\u201ca signal of the extent to which messy politics contaminates good economics\\u201d concerns the difficulty of getting anything moving forward to improve our infrastructure, something that both sides in Congress and probably all Americans would like to see happen.\\xa0 Unfortunately, our politicians fear being perceived as collaborating with the other side and risk being punished by the extreme fringes of either party.
So how the stock market will react after the election depends on how the election winds blow and, for the moment, at least until November 8th, all we have is uncertainty."