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Populism will 'continue to dominate' US markets

 

Populism will continue to dominate US politics and markets, meaning inflation risks are "skewed to the upside", according to Anna Stupnytska.

Appearing on the FTAdviser Podcast, the global economist at Fidelity, discussed how the upcoming 2020 presidential election would affect markets, as president Donald Trump sought re-election as his Democratic opponents also appeared to flirt with populism.

She said: "Whether it is left-wing candidates or right-wing candidates it does seems likely the whole populist dynamic is going to continue. Populist policies will continue to dominate market sentiment and this will affect sectors differently.

"We are now 10 years or so into this expansion and have been waiting for a pick-up in wage growth and we have seen that now over the past year or so. The labour market is tightening, wages are growing and at some point we have to see some pass-through into inflation from wages.

"This combination from potential tariff effects, populist policies and a very tight labour market means that as we look over the next year or so inflation risks are skewed to the upside and that's the most important point for investors to bare in mind, particularly considering where bond yields are today."

Despite this Ms Stupnytska said she was positive about the US economy, with her base case being that it was "relatively strong" compared to other developed markets.

She said: "I think I am quite positive on US growth. It is certainly a late cycle environment and I don't expect growth to be well above trend. Growth around 2 per cent for the year is very respectable.

"On the investment side there is a question about what companies are going to do in the late cycle environment but overall I am quite a bit, but not extremely, bullish.

"We are not likely to see a recession in the US for the next 12 months which, as we know, some expect. I think that probability is still quite low."

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