Halister News

(Bloomberg) -- Credit Suisse sticks with its Sept. view that Trump victory will likely lead to replacement of Fed Chair Janet Yellen and criticism of Fed for negative economic shocks, chief economist James Sweeney and others write in note.

• Likelihood of a Fed hike in December has declined, though still above 50%
  • “A risk appetite panic or clear signs of a negative growth shock could stop the Fed in its tracks”
• Expect a “significant immediate spike in uncertainty about future policy”
  • Policy uncertainty “looks severe”; it’s probably biggest increase in domestic and foreign policy uncertainty in U.S. since at least early 1970s, possibly since early 1930s
• Likely to see “trip toward panic levels” in Credit Suisse’s Global Risk Appetite index, as well as significant increase in volatility of FX, rates and equities
• Still sees as likely a stricter immigration policy, fiscal easing through tax reductions/spending increases, heightened war on ISIS, reduced regulation in some industries, attacks on U.S. firms that export jobs
  • Increased likelihood of boost to govt infrastructure spending is positive for growth outlook, yet spike in uncertainty won’t be good for growth in short run
• Combination of market stress, policy uncertainty and reduced growth forecasts will impact policy outlook