Samy Chaar, Chief Economist, CIO Switzerland Lombard Odier

Samy Chaar (Image: zVg)

The implications for the Swiss financial sector are hard to gauge without more details on the foreign and economic policies of the two candidates. Currently, we expect a victory for Donald Trump and a Republican-controlled Congress to lead to higher inflation and a slightly higher nominal U.S. economic growth rate.

Trump's «America First»economic policy, including new and broader tariffs on goods from China and the rest of the world, along with potentially rising low-wage levels due to stricter immigration policies, would likely fuel inflation.

The U.S. Federal Reserve's interest rate-cutting cycle might end at around 4 percent under these circumstances. Higher interest rates would strengthen the U.S. dollar, and sectors like banking and defense could benefit from these policies.

There’s also a small chance Trump could win with a divided Congress. In that case, we’d still anticipate higher inflation and an earlier end to the Fed’s easing cycle, but with slightly weaker economic growth.

It's important to note that the implementation of Trump’s economic and immigration policies carries many uncertainties. A critical factor for the U.S. and global economy is whether the Fed can manage a soft landing, even if Trump wins in November. Should new tariffs be imposed, their impact on global trade could become visible three to six months later.

If Kamala Harris wins, we expect a divided Congress. This would mean that our base-case scenario of a soft landing for the U.S. economy remains intact. We expect the Fed to lower interest rates further, targeting a neutral level of 3.5 percent for the U.S. economy. With three consecutive rate cuts of 25 basis points, the Fed could reach this level by June 2025.