The US presidential race has moved out of its explosive primary season and into the general election build-up phase, with Hillary Clinton and Donald Trump locking horns for the Democratic and Republican parties, respectively.

For now Clinton is the favourite, according to PredictWise, a market based platform that trades contracts on upcoming events, which has given her a 66% probability of success versus 34% for Trump. But both candidates remain deeply unpopular. As the chart shows, as of 5 May, Trump’s net favourable rating was -41%, while Clinton’s was -19% – a new record for both parties. Their unfavourable ratings meanwhile, were 53% (Trump) and 37% (Clinton.) Since 1980, the candidate with the highest net favourable ratings during the late March to late April period has gone on to win the election with the lone exception of Michael Dukakis in 1988. Pioneer Investments director of currency strategy, Paresh Upadhyaya, has identified three scenarios stemming from November’s election and how they might affect the global economy.
1) Clinton wins the presidency with a divided government (55% probability). “This development will be neutral to positive for markets and the economy at large,” says Upadhyaya. “The likely above-trend US growth rate could prompt the Federal Reserve to speed up its protracted tightening cycle, pushing up Treasury yields. Equity markets are likely to respond favourably to signs that the US political system is not broken and is beginning to work again.”
2) A Trump sweep keeping the Senate and House under Republican control (30% probability). “This scenario potentially presents the greatest risk to financial markets and the US/global economy,” says Upadhyaya. “While Trump’s policy stances can and do change frequently, there are two issues on which he has been most consistent: building a wall between the US and Mexico and promoting fair trade policy. Trump’s potential follow through on trade policy would have negative consequences for the US economy and financial markets. A potential trade war would hit US growth due to weaker net exports and fixed investment.”
3) A Clinton sweep (15% probability). “This is likely to be neutral for the US economy, but negative for financial markets. The economy is likely to benefit from the increase in infrastructure spending that would boost the contribution from government consumption and public fixed investment spending, but that positive is likely to be mostly offset by Clinton’s tax policy hitting private fixed investments.”