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Trump one year reflection and US stock markets

10 November 2017

One year since his election - has Trump made progress on his agenda?

In his election campaign, Trump promised sweeping changes. He was going to "drain the swamp" of Washington; immediately replace Obamacare with something remarkably better and cheaper; push through tax reform and reduce regulation. He would 'put America first', particularly with trade, and would build a wall on the Mexican border paid for by the Mexicans. He would 'make America great again' with a huge infrastructure spending program.

None of these proposals has made any real progress. While he has signed many Executive l Orders, very little has progressed through Congress. His replacement for Obamacare was rejected by Congress and after many changes has still yet to pass.  The debt ceiling was extended mostly as a result of emergency aid being needed for hurricane relief. The proposed tax cuts have this week got bogged down with the Senate plan delaying corporate tax cuts for another year. He was going to "drain the swamp of politics" and accused the Federal Reserve of being manipulated by Obama. But he has more ex Wall Street people in his administration as at any time in recent history and is proposing to replace Janet Yellen with continuity candidate, Jerome Powell, who was originally appointed to the Fed by Obama. Finally, there has been a lot of talk on trade but very little action and the border wall does not yet have funding, certainly not from Mexico. As for spending on infrastructure, this is another area where funding has not been available so far.

Despite diehard support in some parts of the country, his popularity has fallen and in state elections this week the Democrats did much better than expected. The Republicans will have to do a lot of soul searching ahead of the mid-term elections in November next year.

Is Trump justified in taking credit for the rise in the stock market?

In the year since the election, the US stock market has risen over 20% and Donald Trump is fond of taking credit for this. On the economic front unemployment has fallen, corporate earnings are higher and growth has risen. Economic surveys such as the ISM manufacturing index are high. However, as noted above, Trump has actually done very little. After the election the yield curve steepened and resource and bank stocks rallied on the hopes for a Trump stimulus and bank deregulation. This trade lasted for about three months but since then the stocks that you would expect to benefit from Trump policies have underperformed the rest of the market.

With that said, stock markets are forward looking and while hopes for a major boost from Trump policies have faded, there is an element of hope in the market. Failure to make progress on tax reforms particularly cuts in corporate tax rates is likely to set the market back.

To conclude, most of the economic growth and positive stock market may be on the back of policies put in place by the previous administration and the Fed.



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