Trump and new risks - Nomura

Analysts at Nomura explained that the outcome of the election introduces several new, more potent risks to the forecast. 

Key Quotes:

"Three of those risks are probably to the downside and one is to the upside. The negative risks include trade wars, fiscal recklessness, and international frictions. The upside risk is that a better business environment leads to higher investment and higher productivity growth. 

Trade wars:

The risk that increased trade frictions escalate into a trade war with a major trading partner, such as China or Mexico, would further hurt the economic outlook, perhaps throwing the U.S. economy into recession. 

Fiscal sustainability:

The appetite to pass sizable tax cuts along with an equally strong appetite to keep on spending could add to upward pressure on long-term interest rates. 

International turmoil:

President Trump has unconventional attitudes regarding foreign policy. A realignment of U.S. foreign policy could be another source of uncertainty for global business and that could impact the U.S. and World economies. So far President-elect Trump has revealed some members of his national security team, but his full foreign policy team has not yet been made public. 

Better business environment:

We may be too pessimistic. The business friendly nature of the Trump administration may boost business confidence contributing to higher investment, and higher productivity growth than we have assumed. Historically, periods of deregulation have not brought about periods of increased productivity growth, but if the supply of capital to businesses can be improved, and if other regulations that inhibit productivity growth can be modified, then we may see a brighter economic forecast."