Tighter financial conditions, stronger $ under Trump 2.0: S&P Global

The global macroeconomic outlook is hostage to the policy implementation of the new US administration, and potentially large changes in US fiscal, trade and immigration policy are ‘significant unknowns’ at this juncture, it said.

The global economy, however, will start 2025 in a relatively good position, it observed.

Specifically, it is unclear to what extent campaign promises will translate into policy, and when, the rating agency noted in a release.

Risks include the full implementation of the proposed US agenda on taxes, trade and immigration; the end of resilient consumer spending and labour demand; and bond market stress.

For now, S&P Global Ratings has taken a probabilistic approach and is assuming partial implementation of US campaign promises.

Markets have significantly increased expectations that the Fed will stop cutting rates versus only a few months ago.

There are concerns over potential inflation pressures from tariffs, tax cuts and restrictions on labour supply that would require a forceful response from the Federal Reserve.

In emerging markets, robust domestic demand growth is also buoying gross domestic product (GDP) growth. Swings in capital flows driven by shifts in expectations about US interest rates and trade policies require central banks to be vigilant and cautious.

S&P Global Ratings expects Asia-Pacific central banks to take their time bringing policy rates down.

A likely increase in protectionist trade policies among major economies will hurt GDP growth in most emerging markets in the next couple of years. However, the magnitude of the effect will depend on the details, which will become clearer in the coming months.

Fibre2Fashion News Desk (DS)