Trump's first 100 days
On 20 January, Donald
Trump will enter office as the 45th president of the United States. What
changes could his first 100 days bring, and how might they affect the markets?
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The 2016 US election is
over. Voting has concluded and the electoral college has formally elected
Donald Trump to be the next president of the United States.
The first 100 days of Trump's presidency will
begin with his inauguration on 20 January 2017, and conclude on 29 April. The
early period of a presidential term is seen to be particularly significant,
as it is thought that the new leader's influence and power is at its
greatest during this time.
There are three key aspects to Trump's
presidency that are likely to come to the fore during his first 100 days,
making them a key focus for traders:Trumponomics, his relationship with world
leaders, and his attitude to the Federal
Reserve.
So what changes may we see in his first 100
days, and what market impact could they have?
Which
markets will be most affected?
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Markets
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Bid
|
Offer
|
Updated
|
Change
|
|
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19868.6
|
19870.4
|
15:41:01
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8.8
|
|
|
2271.87
|
2272.27
|
15:41:01
|
1.24
|
|
|
1.06936
|
1.06942
|
15:41:01
|
0.00930
|
|
|
113.123
|
113.130
|
15:41:00
|
-1.071
|
|
|
0.75443
|
0.75449
|
15:41:01
|
0.00678
|
What is Trumponomics?
Much of the growth seen in US indices and the
dollar after Trump’s victory was based on the potential impact of
‘Trumponomics’, or Trump’s economic policies for the US. Those policies mark a
sea change from those of Barack Obama, with a focus on boosting US business
with tax cuts, deregulation and infrastructure spending while restricting
trade.
Tax
cuts
Trump’s tax policy – halving what corporations
have to pay and reducing the number of tax brackets for US households from
seven to four – is popular among Republicans and so could well provide an easy
early win, boosting US stocks and indices in his first 100 days.
However, the markets may have already priced
in the positive effect from tax reform. So any sign that Trump might not
deliver could provoke a negative reaction.
Government
spending
Trump’s proposed spending increase may not
prove too popular with Congress, especially as entitlement spending also looks
likely to rise. So he may struggle to make early headway here.
He may find it easier to decrease spending in
other areas, and has made it clear that he plans to renegotiate several key
government contracts when he enters the White House. This could lead to a few
high profile stock market losers.
Deregulation
Trump’s stance on regulation is popular with
many Republicans, so we may see early movement here. And his governmental
appointments show an intention to put business first.
Major banks could benefit if he repeals the
Dodd-Frank act, and traditional energy companies could get a boost if he rolls
back environmental regulation – though that could prove problematic for US
renewables.
Trade
tariffs
Both TPP and TTIP look set to crumble early in
Trump’s presidency, but his planned use of high trade tariffs may be harder to
enact – especially if he continues to anger key trading partners.
In the longer term, restricted trade will
increase goods prices, which would in turn lead to inflation. However,
restricting free trade may well harm key businesses in both the US and abroad
before that happens.
Trump vs the world
Just as important as Trump’s policies is his
ability as a statesmen and how well he gets along with key figures both
globally and domestically. And it is here that the difference between Trump and
his predecessor might be felt most strongly in his first 100 days as president.
China
A war on words from both sides threatens to
expand into a trade dispute that could come to define Trump’s presidency. How
far US-China relations might fall remains to be seen, but with each new
antagonistic move conciliation appears less likely. The markets will be keeping
a close eye for signs that hostilities are increasing.
Watch out for:
·
Competition for influence in the Pacific and South China sea
·
Any signs China is devaluing the yuan
·
Trump making statements about Taiwan
Europe
Trump’s election was greeted with enthusiasm
by Eurosceptics, but few others. He was vocal about his support for Brexit
throughout his campaign and has allied himself with Nigel Farage in the months
since, with Farage visiting Trump a number of times following the election.
European markets may struggle if Trump makes any early moves towards
isolationism, however.
Watch out for:
·
German chancellor election - 12
February
·
Dutch general election - 15
March
·
French presidential election (rd.1) - 23 April
Russia
In contrast, Trump’s relationship with
Vladimir Putin and Russia has been growing stronger as his inauguration looms.
Trump and Putin have spoken glowingly about each other, and the growing iciness
of Obama’s time in office appears to be thawing fast. One major early winner
from this may be Exxon-Mobil, whose CEO Rex Tillerson – himself close to Putin
– is now Trump’s Secretary of State.
Watch out for:
·
Any signs of Russian aggression in the Ukraine, or other Baltic
states
·
What happens next in Syria
Trump vs the Fed
Another key figure who felt Trump’s ire
throughout his campaign was Janet Yellen. Trump has previously claimed he could
replace the Fed chair with a Republican, which would suggest he intends to
politicise the Fed, bringing it much more into line with Republican (or his
own) policies. While he won’t replace Yellen in his first 100 days, any steps
in that direction would provoke a market reaction.
In the meantime, the Fed has to keep the US
economy steady while Trump initiates a complete U-turn in economic policy. We
may well see one or two interest rate rises early in Trump’s presidency to
mitigate against his increased spending. How Trump reacts to Yellen’s decisions
will a key indicator of how the next four years may play out.
Watch out for:
·
US durable goods reports (27 January, 27 February, 27 March)
·
US consumer confidence reports (31 January, 28 February, 31 March)
·
US non-farms reports (3 February, 3 March, 7 April)
·
FOMC rate announcement report (15 March)
By | Associated Press – 8 hours ago
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