What about the effect on the broader economy? Citigroup’s economists argued that a Trump win would create much more uncertainty about government policy, which would lead to tighter financial conditions — banks would become less willing to lend and investors less willing to take risks. That, in turn, would be enough to “trigger a significant slowdown” in this country and around the world.
All of that is plausible but far from certain. Economists have only recently begun to develop ways to estimate the effect of “policy uncertainty” on the economy; the field isn’t nearly advanced enough to make confident assertions about how a single event like an election surprise would affect the global economy. More generally, the dismal science’s record of forecasting recessions is, well, dismal. Few economists saw the global financial crisis coming (despite what were, in retrospect, numerous warning signs); on the other hand, economists are famous for predicting recessions that never occur. The same Citigroup team that’s forecasting doom from a Trump victory has for more than a year been predicting a global recession triggered by China.
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