Investing in a Trump World

One month into his four-year term as POTUS and President Trump has already caused a worldwide stir through questionable cabinet choices, alternative facts, and controversial decisions such as his executive orders to place travel bans from selected countries with high Muslim populations, and the defunding of international planned parenthood. In fact, unless one is an avid follower of Fox News, it is hard to remember the last time there was a positive article or news story on Donald Trump.

However, personal beliefs and values take a back seat when investing in the market. Logic starts to come to the forefront of the mind, and one’s opinion on Trump’s actions beginning to take the form of what is positive or negative for the market. From an investment perspective, it is essential to look at Trump’s administration and determine the pros and cons of his leadership in order to develop an opinion on his influence on the market.

In terms of pros, the proposition of a tax reform looms as the most prevalent of factors that would induce a positive market. such a change, including tax cuts and the return of trillions of corporate profits held in overseas tax havens, would have an enormous effect on the US economy and therefore the markets.

Furthermore, the deregulation of industries such as the financial sector has impacted positively on the market, which has enjoyed a post-election rally. This in turn has a knock-on effect on other industries, with the common thinking being that with deregulation comes a decline in cost of business.

While it remains to see fit if he will deliver on this promise, the possibility of Trump rolling out an extensive infrastructure plan has also boded well for the market. a spending of up to $1 trillion dollars on the renewing and expanding of bridges, tunnels, roads, ports and water systems would pump wealth into the economy and bring jobs to struggling areas. Combined, all these factors make for an optimistic sentiment, a somewhat immeasurable aspect that does wonders for business, the economy, and thus the market.

However, much of this isn’t being portrayed in the everyday media, largely because there are numerous cons that counteract such positive facets. For one, President Trump is clearly either distracted or prioritises very wrongly. He has so far clamped down on Muslim immigration from select countries even though known danger countries such as Afghanistan and Pakistan were left off the list. Furthermore, his questionable cabinet selections and ill communications to allies along with a seemingly favouritism to Russia have left critics shaking their heads.

Even more damning on the President’s image and his influence on the market is apparent inability to appear presidential – thus far into his presidency the world has been exposed to his strange insistence on alternative facts that are easily debunked, not to mention his dismissal of anything he doesn’t agree with to be ‘fake news.’ Trump continually argues with the intelligence community and abuses the news media, then complains of his negative portrayal by the media. Needless to say, this incapacity to focus on the job at hand offsets the positive vibe created.

These cons of Trump are magnified by his involvement in scandals and legal issues. Without going into detail, Trump has been sued for defamation, has numerous allegations against him for sexual assault, shoddy business dealings, and been bankrupt 4 times. No president of the United States has ever been so linked to such things, and as a result creates negativity in the economy and thus the markets.

Despite all this, the markets are up. Where they go next will no doubt largely depend on Trump and his actions.

Source: Bloomberg