If you haven’t noticed, Trump is addressing each of his campaign promises, which is both refreshing and novel to see for any politician, let alone Trump. He began with addressing the Affordable Care Act on Day 1 to Dodd Frank, stifling regulations and Iran this past Friday. In between he has dealt with immigration and the Supreme Court nominee amongst many other issues. I have lost count of the number of executive orders that he has signed in his first two weeks in office. Simply amazing!
Next up are tax reform, trade and a major infrastructure program.
Trump has elevated the visibility and influence of the Presidency and has gained the attention of governments, corporations and, most of all, the citizens of the world. He certainly is polarizing, as can be witnessed every day by the media and in responses to my weekly blog from complete strangers and calls/emails/texts from my friends here and abroad. The opinions range from Trump potentially being a huge success to him being impeached within two years. And you ask why we are having more volatility in the financial markets?
The only way to successfully invest is listen through all of the daily noise, find that underlying trend(s) and invest accordingly. We are right now in the sweet spot: the global economies are improving albeit slowly; business and consumer sentiment are rising rapidly; monetary authorities are staying one step behind therefore monetary policy will remain accommodative for the foreseeable future; earnings growth, along with order patterns, has begun to accelerate and America is back in business even if you don’t approve of Trump’s tactics and policies.
Trump and his team have some definite views. If you don’t listen, you will not make money and, in fact, you will get hurt.
What is clear?
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Domestic and foreign corporations should build capacity in the United States not only to supply domestic demand but also to export abroad. He will change tax and regulatory policies to make this happen.
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Individual and corporate tax rates will go down stimulating growth here and also abroad. Repatriation of foreign cash will be part of the deal with some of the cash earmarked for capital spending and research.
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Onerous parts of Dodd-Frank and other regulations will be eased to promote growth. The Affordable Care Act will be reconfigured to increase the competition to lower the rates and also to improve the quality of healthcare. All parts of the healthcare industry will be part of the solution rather than working against each other.
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Both the carrot and stick will be used to induce corporations to build here, hire additional employees and hold down prices. For example, he promised the healthcare industry that he will cut the time it takes to bring new products to market therefore significantly increasing the ROI for research spending plus lower corporate taxes in return for holding back/cutting prices and building facilities here. It was a net positive for the drug industry when initially perceived as a negative.
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Fair trade will be the order of the day when negotiating bilateral trade deals. Government subsides including low or no cost loans will be part of the equation in trade talks. Trump’s team understands the importance of globalization, so don’t expect them to do the unthinkable and enter trade wars where no one wins. His teams will analyze/evaluate the reasons why some countries have huge trade surpluses with the world including us. I have commented many times that Germany wants to keep a Eurozone not so much for less barriers amongst nations within Europe but because they are huge winners globally from a weak Euro. And China does clearly manipulate its currency. Japan and Mexico do not.
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A major infrastructure program will be initiated quickly without the regulatory delays that held back perceived “shovel ready projects” in the past. Who can argue against the needs and multiple benefits of such a program? And it will be U.S workers getting employed with U.S. supplied materials.
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Our police and national defense will be strengthened and our borders made more secure. Investing in the U.S. will be the place to locate that next plant.
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The U.S. will be respected, if not feared, by many governments, which will lead to positive change in our foreign relations and trade. The U.S. will no longer be seen as a pushover. While the uncertainty is troubling, governments are figuring out how to work with a stronger U.S. rather than abandoning relations with us.