Investing.com — The outcome of the U.S. presidential election may be too close to predict, but Charles Gave of Gavekal Research believes that if Republicans pull off a big victory on Tuesday, investors should sell off the French bond market as quickly as the internal market. The economic problems will certainly deepen.
“I have no idea if Trump and the Republicans will actually win,” Gave said. “But I do know that if they win, and make a big profit, investors will have to sell the euro and the French bond market as quickly as possible,” he added.
The warning is not without merit. The eurozone is already grappling with an economic crisis, with France, facing mounting deficits and debt, at the sharp end of investor concerns.
History also points to eerie parallels between the current situation and the 1980 US election, Gave suggested, marking Ronald Reagan’s victory in 1984, which brought about significant changes in economic policy.
A similar shift could occur if Republicans gain control of Congress, and former President Donald Trump wins the election and implements his tax cuts and plans to shrink the federal government, returns on invested capital at American companies would likely increase, just like borrowing. .
“Higher US long-term interest rates will also push up long-term interest rates in other major economies,” Gave said.
This will be a major problem in France, Gave says, amid growing deficits and debt without the offsetting compensation of faster economic growth.
“Soon France will be as bankrupt as Latin America in 1982, Asia in 1997 or Greece in 2011,” he added.
