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Donald Trump will become the next president of the United States in a shocking turn of events that saw the GOP candidate win several battleground states, exit polls showed late on Tuesday.

Trump’s stunning come-from-behind win was catalyzed by a worsening political scandal involving Democratic nominee Hillary Clinton, who learned just last month that the FBI will dig deeper into her use of a private email server while secretary of state. However, analysts note that the Trump campaign was gaining momentum long before that.

The election results triggered a sharp slide in Asian stocks, an outcome that may extend to European and US markets. Citigroup predicted last week that a Trump presidency would lead to a 5% drop in the S&P 500 Index. The bank also warned of a recession in the aftermath of a Trump win.

“A Trump win risks slower growth or recession if trade is restricted and fiscal expansion plans curtailed,” Citi analysts said. “Uncertainty alone could hit the economy. Global growth will also be impacted if uncertainty rises, US growth is hit and U.S. financial conditions tighten.”[1]

European and US equity futures were down sharply Tuesday night, pointing to a volatile start to the day. The CBOE VIX, a measure of implied volatility, shot up 40% last week on election-related speculation. The so-called “fear index” is primed to surge to recession-levels in the coming days, which will be accompanied by a sharp retreat in US equities.

The US dollar is also likely to go lower in the short-term, as Trump’s presidency raises major question marks about economic stability, US trade relations and even the Federal Reserve. However, longer term, a Trump presidency could lead to a large rally in the US dollar. That’s because the GOP candidate has promised massive corporate tax cuts, which could send US bond yields higher.

Trump’s anti-free trade rhetoric is also raising fears about a global trade war, leading to a major revolt on globalization. According to Simon Johnson, former chief economist to the International Monetary Fund (IMF), a Trump victory could “take the global economy “back to the Great Depression in terms of the impact on trade and consequences.”[2]

Gold prices rose sharply Tuesday night, as investors looked to hedge against growing financial market tumult. Investors will likely ride out the volatility by maintaining ties to precious metals and other risk-off assets.

Trump’s presidency brings with it significant uncertainty around economic policy, monetary policy and even immigration. The new administration must bring clarity to these and other questions if it hopes to maintain a semblance of calm in the market.

[1] Gemma Acton (November 4, 2016). “Citi predicts possible 5% drop for S&P 500 if Trump wins, warns of recession.” CNBC.

[2] Szu Ping Chan (November 6, 2016). “US election 2016: this is the global market turmoil that would be triggered by a Donald Trump victory.” The Telegraph.

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