What is the cost of the election for the U.S. people?
The matchup between Hillary Clinton and Donald Trump is one of the craziest ever seen. But how is it effecting the economy?
Well, for a start, growth was already off to a poor start in 2016 and the economic indicators are not strong enough.
Bernard Baumohl, chief global economist at The Economic Outlook Group, says that “Ultimately, what will determine whether we have a recession next year is the comfort level Americans have with who occupies the White House in 2017. Right now, that comfort level is low. Most voters don't like Clinton or Trump.”
In corporate America, there's alarm at how tight the race is now. Many believe Clinton would be better for the economy than Trump, but even with Clinton, CEOs have concerns about how friendly she will be toward businesses.
Nearly 20% of the S&P 500 companies mentioned the presidential election in their latest quarterly earnings call as a red flag.
There’s a simple combination that powers the U.S. economy: People and businesses have to go buy stuff. When they do, America prospers. When they don't, America suffers.
The great fear is that the chaos of the election will cause Americans to keep their wallets shut. It's already happening among CEOs. Yes, businesses are still hiring workers, but companies aren't spending much on new equipment and research.
This isn't a totally new phenomenon. Research shows a slowdown in so-called "capital expenditures" is common in election years. But Trump is a wild card that's arguably making businesses even more cautious.
"A candidate like Donald Trump is the mother of all uncertainties," says Baumohl. Businesses don't like to make huge investments in uncertain times.
America's economy only grew 1% in the first half of the year, well below the historic average of over 3%. A lot of that slow growth is blamed on companies holding back on big purchases because of the energy sector slump and Brexit. Now the U.S. election is on everyone's minds.
In August, Clinton held a sizable lead. But Trump is the ultimate wild card. The usual models don't seem to fully capture the Trump effect. The race is now again neck-and-neck in key swing states.
The question is whether the American shoppers are also getting spooked. Business spending is important, but individual spending makes up the bulk - nearly 70% - of the U.S. economy.
