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Inside this issue
NADA Economist: Assessing the Economic and Market Impact of the Election
Trump Carves Out Improbable Victory with Rust Belt Support
Republicans Defend Grip on U.S. Congress as Trump Wins Presidency
Trump, U.S. Congress Will Agree on Some Issues, Long-Term Questions Loom
Donald Trump's Victory Unsettles Car-Mileage Debate
Top Stories
NADA Economist: Assessing the Economic and Market Impact of the Election
By Steven Szakaly

In assessing the impact that the election of Donald Trump to the presidency will have on the markets and the economic outlook, it is first vital to properly separate the immediate from the short term, medium term and long term.

As for the immediate, indicators such as stock markets, gold prices and foreign currencies are currently reacting to fear and uncertainty – not economic fundamentals. Similar to the immediate aftermath of the Brexit vote, Tuesday night and Wednesday’s market reactions are a reflection that, above all else, markets hate uncertainty, and that markets are still in the process of adjusting to the fact that computer models have been unable to help them make accurate predictions of political outcomes.

Moving on to the short term, it’s entirely possible that markets will continue react poorly, as companies are likely to take a breather on hiring and capital expenditures. That said, the more important short-term indicator is how consumers react, and in this regard we expect their reaction to be generally positive. Both happy people and sad people tend to spend more as long as they have jobs and unemployment is at historic lows. So barring a serious bout of layoffs affecting multiple industries – which is highly unlikely – economic activity will continue at the somewhat moribund rate we have seen as of late.

Over the medium and longer terms, Trump’s stated or understood policy objectives will produce significant positive tailwinds, particularly as they direct us to lower corporate taxes, increased infrastructure spending, and reduced regulation across all aspects of business. The negatives are, of course, an assault on free trade and immigration. But these require a nuanced look. Trump has been notably silent on the status of H1B visa grants for highly educated workers, and, given his general pro-business posture, it is not completely out of the realm of possibility that the H1B visa program gets expanded under a Trump administration – which would be a boon to U.S. economic growth. And on trade, even if Trump truly wants to end NAFTA, he will find himself stymied, as these trade deals are complicated and require exit negotiations. What’s more, it would take years for the negative effects of a successful exit to take hold.

What is needed is clarity. A clear set of economic policy goals delivered before the New Year would go a long way to ensuring that any immediate uncertainties are smoothed over.

So where does this leave car sales? Still slowing in response to the U.S. market maturing – but not as a result of the election. In fact, in the medium and long term, if increased infrastructure spending happens and certain tax cuts materialize, it will mean a better long-term outlook that what’s in front of us at present.

Szakaly is chief economist of the National Automobile Dealers Association.

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Trump Carves Out Improbable Victory with Rust Belt Support

Donald Trump’s come-from-behind victory over Hillary Clinton signals that the state of the U.S. auto industry was clearly on the mind of the American voter ... Trump has provided few details of his policy priorities for restoring U.S. manufacturing jobs. But he has called for an immediate moratorium on new regulations, and a review of existing ones that threaten jobs. That could put one of the signature efforts of the Obama administration -- the automotive fuel-economy and emissions-reduction program to combat global warming -- under scrutiny ...

Automakers and suppliers have poured billions of dollars into R&D and dramatically increased vehicle fuel efficiency since the rules were put into effect in 2011. But getting incremental improvements from here on out could get costlier, and the consumer shift toward light trucks has complicated efforts to hit the fleetwide targets. The rules are already under a required midterm evaluation to determine whether they should remain intact or be adjusted. And the outcome of that review will be swayed by Trump’s pick for EPA administrator.
Source: Automotive News

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Republicans Defend Grip on U.S. Congress as Trump Wins Presidency

Republicans maintained their majorities in both chambers of the U.S. Congress in a momentous election on Tuesday in which Republican Donald Trump won the presidency, empowering the party to reshape Washington ... The new Congress will not convene until Jan. 3, but the "lame-duck" Congress will return next week and Republicans are set to begin the process of picking leaders for both chambers ...

In a huge disappointment to Democrats, Republicans were on a pace to lose only a handful of seats in the House, well below the double-digit losses some predicted. Similarly, Democrats gained only one seat in the Senate, although a few races were still to be determined, including New Hampshire, where incumbent Republican Kelly Ayotte was deadlocked with Democrat Maggie Hassan early on Wednesday.

In Illinois, Democratic U.S. Representative Tammy Duckworth defeated Republican Senator Mark Kirk. Democrats needed to pick up a net five seats to win Senate control.
Source: Reuters

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Trump, U.S. Congress Will Agree on Some Issues, Long-Term Questions Loom

President-elect Donald Trump will enjoy Republican majorities in both chambers of Congress when he takes office in January and an early Capitol Hill honeymoon is likely on several issues, but a long-term romance may be more challenging ...

Plans by House Financial Services Committee Chairman Jeb Hensarling, a Texas Republican, to rewrite banking law to ease regulations, and to limit powers of the Consumer Financial Protection Bureau, are likely to have smoother sailing ...

Trump and congressional Republicans will find common ground on taxes… Trump has called for cutting the U.S. corporate income tax rate to 15 percent from the current level of 35 percent; Ryan's tax plan proposes going to 20 percent.

Congressional Republicans likely would welcome a move by Trump to rescind some of Obama's executive actions on immigration, labor rights, the environment and global warming.
Source: Reuters

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Donald Trump's Victory Unsettles Car-Mileage Debate

Car companies are seeking potential relief from lofty future fuel-economy targets

In 2005, with shaky finances that would eventually lead to a government rescue, General Motors Co. tapped Donald Trump to help promote a fuel-thirsty Cadillac sports car. Now, with Mr. Trump’s victory in Tuesday’s presidential election, auto executives are poised to gain a potential rollback of stringent mileage regulations such cars have a tough time meeting. Mr. Trump on Wednesday signaled future fuel-economy targets developed under the Obama administration could be ripe for changes. Environmental regulators are set to propose sometime next year whether future fuel-economy targets for auto makers should be relaxed, toughened or left unchanged.
Source: The Wall Street Journal

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