Confirming that even Wall Street’s forecasts are as volatile as general election polling, over the weekend Citi hiked their odds of a Trump presidency from 35% to 40% (having previously lowered it in the same interval), noting that ‘polls have started to tighten ahead of the U. S. presidential election, and Citi has raised the probability of a Trump victory.” Nonetheless, quoted by Bloomberg, Citi said that its “base case is for a Clinton victory and mostly continuity in policies, which would leave U. S. and global growth expectations relatively unchanged,’ while describing the U. S. contest as ‘increasingly bizarre.’
‘But a Trump victory is a wild card and Citi expects this, among lingering uncertainties from Brexit and elsewhere, may cap the prospects for global growth to pick up in the remainder of the year,’ it said.
In terms of what assets Citi believes will be impacted, the banks says that it “expects a Trump win would bring out higher volatility in gold and forex, which in turn should lead to higher volumes in other precious metals.’ The reason why gold may be in for a bumpy ride in the final quarter is that in case Trump’s odds rise even more, investors will be preparing for the possibility of higher U. S. interest rates. Under the bank’s base case it may be at $1,320 in the final quarter, or $1,425 under the bull case, which included the possibility of a Trump win.
Elsehwhere, in a report issued this morning by Morgan Stanley’s Michael Zezas, the bank said that “improved odds of a Trump win raise risks to our ‘policy incrementalism’ thesis. If Clinton’s lead remains slim, or worsens, markets may start reflecting Trump’s potential early policy path: tax reform & trade protectionism. We ID vol hedges across assets and strategic considerations for US rates.”
This post was published at Zero Hedge on Sep 26, 2016.
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