Our Hot Take on the Trump Upset

Our election model turned out to be right. And as we predicted, the GOP kept the Senate, lost very few House seats, and added governors. The overnight risk-off shock in equity futures markets precisely equals the correction induced by the Brexit referendum. Buy the dip? Risk on? Probably. It depends on signals from Trump as to whether he is serious about implementing the worst of his protectionist agenda. Abstracting from that, a GOP Congress can enact Trump’s business and personal tax cuts, repeal Obamacare, slash regulations and liberate energy production. We continue to believe that Trump can be the first truly pro-growth president in sixteen years. We have avoided a toxic gridlock situation that could have led to a series of crises, including a debt-ceiling crisis next March. The move higher this morning in Treasury yields may speak to Trumps earlier casual remarks about Treasury debt, or reflect belief that a debt-fueled infrastructure binge is coming. We don’t give either expectation much credence.