Janet Yellen having this week talked of a “soon” interest rate hike in the US, has in my mind created more doubt. The US economy is currently at a crossroads as the work of Barrack Obama and his Democratic government over the last 8 years could slowly start to unravel. Obama care is set to be pulled apart with President elect Donald Trump set to use only what he considers to be the best bits.
Trump is dead set on bringing industry back to the United States shores by basically pricing out imported goods. Trump is also prepared to heavily tax US companies goods that are made outside the border to encourage businesses to bring manufacturing back to the homeland. Whilst this might seem like a logical economic move it will potentially cause chaos as trade agreements and current business models could have to change.
There was never going to be any doubt that Donald would bring major change to the US economy if he was elected but will the short-term disruption out-weigh the benefits? The US Dollar had lost 5 cents against Sterling upon the announcement of Trumps victory however since then it has clawed back 2 cents.
In my opinion despite the uncertainty surrounding what Trump might do there is a confidence in the market place that the US economy will be okay. However, in the FOMC (Federal Open Market Committee) there is an element of nervousness settling in as they want to wait for more facts. The committee has already proven they are prudent and will avoid any rushed decisions by the lack of hikes so far, this year. I believe this trait is not to change now and we will go through 2016 without a US interest rate hike.