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Trump's surprise win: Aktia's chief economist says markets were wrong again

Aktia Bank's chief economist Heidi Schauman said she was concerned that European markets again incorrectly predicted the outcome of a major vote. The last time markets got it wrong was last summer when Britain voted to leave the EU; the so-called Brexit. This time it was the unexpected election of Donald Trump as US President, a miscalculation that resulted in nosedives on financial markets early on Wednesday.

Heidi Schauman
Aktia Bank's Chief Economist Heidi Schauman. File photo. Image: Yle

In an interview about how Finnish markets would respond to a Trump victory, Schauman predicted it would follow other European market downward trends - and at least in early trading Wednesday, and that's what happened.

"It's actually a question of a correction," Schauman said. "Markets were counting on a victory for Democrat Hillary Clinton, and along with [that expected victory], a predictable future."

She said the unexpected outcome has resulted in a significant reduction in investors' willingness to take risks.

Schauman said she wondered how markets misjudged Trump's triumph - like they were caught by surprise by Britain's Brexit referendum.

Schauman: Are elites out of touch?

"Is it the case that the divide between the powerful elites and the American people is bigger than it appears? Market investors are a part of the so-called elite and haven't been realistic in their prognoses," Schauman said.

The economist said it is too early to tell if Trump's election will spark an economic catastrophe, however.

"That will be determined by Trump's economic and political policies. Previously he's threatened to renegotiate trade deals, like the Transatlantic Trade and Investment Partnership (TTIP) with the EU which could have major consequences on the economy," Schauman said.

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