It’s interesting how quickly the consensus around what a Trump presidency means for markets went from “it’d be an unequivocal disaster” to “his policies will bring forth a new and lasting economic expansion.”
Moral of the story: consensus has a habit of being wrong and reality tends to be bit more nuanced.
What should we make of all the hoopla then?
Let’s first note that:
Trump will be moving his oversized self-portraits into the West Wing at a time when the current bull market will be nearly 3,000 days old — 34 months longer than the average advance since the 1930s.
Obama was able to dodge a recession during his presidency (apart from the one he inherited). Trump won’t be so lucky.
But the little that we do know about Trump’s intended policies are, for the most part, very equity market positive.
The tax cuts/reforms, foreign profit repatriation, and deregulation are all low hanging fruit that will help boost the economy. His “yuuge” fiscal and infrastructure spending plan, if passed in full, will drive GDP up a few points through demand growth.
The single most important thing I gather though, from the election of Trump, is the change we’re experiencing in public sentiment.
The concern over public debt that put many “Tea Party” republicans into congress has now clearly been supplanted by a “growth at any cost” narrative. We’re seeing a global shift from fiscal austerity to a call for free spending.
This is a massive regime change that will impact markets over the coming decade.
Ray Dalio, the founder of Bridgewater (world’s largest and most successful hedge fund) wrote a note this week that is worth reading in full..
