A presidential election whose outcome could significantly alter the role of the US on the world stage, and the manner in which it plays that role, is now just weeks away, and a contest that as recently as mid-August looked to end with a comfortable victory for former Secretary of State Hillary Clinton, the candidate of the incumbent Democratic Party, is shaping up as a race to the wire that could result in a victory for the Republican nominee, business mogul and reality television personality Donald Trump. Clinton remains the favorite, but the tightening of the presidential race has dimmed the Democrats’ prospects for reclaiming a majority in the 100-seat Senate, regardless of the outcome of the presidential election, and with the Republicans enjoying a comfortable majority in the 435-member House of Representatives, it is very probable that a victory for Trump would result in Republican domination of both the executive and legislative branches of the federal government.

Clinton is a known quantity, and her victory would likely have little negative effect on investor sentiment. Criticized by left-leaning elements within her own party as a “neoliberal” on economic policy matters and a “neoconservative” in the foreign policy realm, she has over her career generally maintained a broadly centrist and pragmatic posture. Clinton has tacked to the left on some issues during the current campaign. She has come out in opposition to the TPP, and recently proposed a large increase in the estate tax. However, the high probability that Republican majorities in both chambers of the Congress will curb her ability to implement policies that are not firmly embedded in the political mainstream reduces the danger that such proposals might spook the markets if she wins the election.

The same cannot be said for Trump, whose policy proposals are almost completely devoid of substance and alarmingly high in macho bluster. He has threatened to initiate a trade war with China, implied that he would be willing to use nuclear weapons to defeat ISIL, signaled that he would not honor the terms of “bad deals” negotiated by previous administrations, and suggested that he would force creditors to accept a restructuring of US debt.

Many of Trump’s proposals are so outlandish as to suggest that he is simply making it up as he goes along, a conclusion supported by his habit of reversing his position on issues, sometimes within a single interview. For all his bluster, it is possible that the biggest risk associated with a Trump presidency would be an inability to predict with any assurance what path he might pursue. Based on what he has revealed during the campaign thus far, Trump’s policy positions are not based on any overarching ideology, but rather on how a particular stance affects his popularity. There is no hint of pragmatism in his approach to leadership, and unless he reveals his campaign persona to have been an act designed to maximize his vote share, there is every reason to expect that his tenure in the presidency would be marked by unpredictability and uncertainty.

Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. For more information on The PRS Group and its wide range of risk products, go to: www.prsgroup.com or contact Michael Burke, Director of Client Relations at (315) 431-0511, extension 311