Our first thoughts on the U.S. election results.

After one of the most bitter and divisive U.S. Presidential election campaigns in living memory, the outcome is arguably the one that markets were dreading.

Whereas Clinton was the “business-as-usual” candidate, Trump is much less predictable. Regardless of what the longer-term impact of his policies will be on the economy, risk-asset markets are likely to respond with high levels of volatility in the shorter-term as we try to figure out what those policies are and how many of them are realistic. A December rate hike from the Federal Reserve, priced as almost a certainty the day before yesterday, may now be off the cards.

Where Clinton, under pressure from unions and Bernie Sanders supporters, vacillated in her support for free trade in general and the Trans-Pacific Partnership (TPP) in particular, Trump has positioned himself as an all-out trade warrior. That could dampen the spirit in emerging markets (just look at the Mexican peso), which have been recovering strongly for most of this year.

Safe havens such as the Japanese yen and Swiss franc are likely to benefit during the immediate fallout—although the picture is much less clear for the U.S. dollar and U.S. Treasuries, of course. A concerted “sell-America” trade is a distinct possibility.

Nonetheless, we believe the Brexit playbook is useful here. Market volatility may endure for a little longer, but as it does so, it could deliver buying opportunities. A Trump administration is likely to be better for the traditional energy sector, and less damaging to the healthcare and financial sectors, than a Clinton Presidency. United government may also remove the partisan obstacles to meaningful infrastructure spending and corporate tax reform, particularly the issue of profit repatriation—although it’s useful to remember that Trump is far from popular among many traditional Republicans.

The biggest risk, of course, is that Trump tries to turn some of the more populist rhetoric of his campaign into reality. Whoever had emerged victorious today, the forces that have led to the rise of the likes of Trump, Sanders, Farage, Le Pen and Wilders are not going away, and partisan shouting matches, assaults on free trade, a dirigiste approach to unsustainable industries and a disregard for the financial robustness of the U.S. are not viable solutions. The result could be a tug of war between the deflationary forces associated with lower economic activity and the inflationary forces from higher trade barriers.

Globalization, slow growth and demographic change mean that, for the developed world’s middle class, rightly or wrongly, it feels as though the pie is getting smaller. When we feel that the pie gets smaller, we fight over it ever more ferociously. Rancor simply makes it more difficult to pursue the policies that can grow the pie again—and the spiral continues.

On the morning of the election results we expended some of these points during a webinar with our Global Head of Alternatives, Tony Tutrone.