Citi Issues Recession Warning if Trump Wins and a Dip in S&P

Analysts at Citi have predicted that there could be an immediate sell-off of up to 5 percent for the S&P 500 if Donald Trump wins the elections. It also issued an even sterner warning of a slowdown in growth and a possible recession for the US economy. When the investment bank ran a survey in September, many believed Hillary Clinton would win the elections, but it now admitted that the FBI probe into her emails might mean a Trump victory. The stocks-concern for Trump being president is on two fronts. Speaking of the long term, the research team commented that “A Trump win risks slower growth or recession if trade is restricted and fiscal expansion plans curtailed. Uncertainty alone could hit the economy. Global growth will also be impacted if uncertainty rises, U.S. growth is hit and U.S. financial conditions tighten.” The report continued that “If Donald Trump were to win, that outcome would have been unexpected and thereby may cause a jump in the equity risk premium with negative P/E (price –to-earnings) multiple repercussions. We think a Trump victory could spark a 3-5 percent setback in the S&P 500,”

Though analysts are generally agreed that a trump victory would hurt stocks, some believe there are benefits. Lawrence G. McDonald of ACG Analytics reported in a New York Times article on Monday that “Trump will create a colossal panic, but the relief rally will be outstanding. Trump’s bark found in his anti-globalization position in reality will be a lot worse than its bite in terms of actual implementation,” The Citi note was also in agreement that it wasn’t all bad news. “The energy sector, coal mining, possibly chemical manufacturers and utilities would do better under less environmental scrutiny versus a Clinton win, which would be better for more environmentally friendly firms.”