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Jan von Gerich, Global Fixed Income Strategist for Nordea Markets, suggests that given the divisive personality of the US president, major differences of opinion between the Republicans and Democrats, and the far from unified stance even within the parties, passing legislation will become much more difficult.

Key Quotes

“On the domestic front, major legislative initiatives will probably not be able to pass. The divided Congress is unlikely to be able to agree on immigration reform, infrastructure investments or further tax changes, though Trump will probably try to find support for his proposals initially.”

“When it becomes clear Trump will not find the support he is looking for in Congress, he will probably seek to promote his agenda through executive orders. On that front, he has already talked about ending the right to citizenship for children of non-citizens and authorized migrants born on US soil via an executive order, defying the Constitution. He will no doubt seek to test his executive powers, as he is probably counting on some support from the Supreme Court. The response from the judicial system would ultimately put limits to what the president could do.”

“Frustration on the domestic front will probably also push Trump to focus more on foreign and trade policies. This could mean a tougher stance on trade negotiations, more tariffs and further escalation of the trade war. The trade war could broaden from being primarily a conflict between the US and China to cover other areas such as the EU as well.”

“The President will probably also take a harsher stance on policing the sanctions on Iran, which could further hurt relations between the US and EU and leave the oil market more vulnerable to supply disruptions elsewhere.”