More than three weeks after Donald Trump was elected, political uncertainty has evaporated in the US while it has increased in Europe.
In the US, the economic-policy uncertainty index has fallen well below its long-term average (100). Following Donald Trump’s election, the level of uncertainty had surged but, somewhat unexpectedly, the level has remained weaker than after the Brexit vote (end June). Since then, the president-elect’s team has continuously downplayed the importance of Mr. Trump’s electoral promises. Yet, we don’t know very much about the economic policy of the Trump administration. But, day after day, it seems that the most controversial measures will be put aside. Donald Trump - who absolutely needs to secure a majority in Senate – will probably focus, at first, on the most consensual measures in his camp, namely tax cuts.
Conversely, in Europe, political uncertainty remains quite elevated. The breakdown is however striking.
- In the UK, despite the resilient economic data released since the vote, the outlook remains highly uncertain.
- In the Eurozone, the heavy political agenda (general elections in France and Germany in 2017) and the upcoming referendum in Italy (4 December) are the main sources of concern. Surprisingly, the index has just reached an all-time high in France (November), while in Italy it has remained contained so far (below its levels reached during the sovereign-debt crisis).
However, on the one hand, it is premature to believe that the Trump’s presidency will be an easy ride. While, on the other hand, we believe that mainstream parties are very likely to win the general elections next year (both in France and Germany). Italy remains nevertheless our main source of concern, whatever the result is (Sunday 4 December), general elections are scheduled in spring 2018, at the latest.