Will Bartleet, CIO and Portfolio Manager of Pacific Multi-Asset.
Last Friday saw Donald J Trump take his seat at the Resolute desk in the oval office.
Many commentators doubted that he could become the most powerful man on the planet and sometimes struggled to keep up with his policies once he took office. So, what can we glean from his inauguration speech? Here are the key points and their implications for markets:
“We will build new roads and highways and bridges and airports and tunnels and railways all across our wonderful nation”
His promise to spend $1 trillion on infrastructure is a positive for cyclical industries such as construction companies, benefitting value stocks.
“We will get our people off of welfare and back to work, rebuilding our country with American hands and American labor.”
This boost from government spending combined with tax cuts will encourage the Federal Reserve to raise rates more quickly than they would have done otherwise – a headwind for interest rate sensitive parts of the fixed income market; a tailwind to financial companies whose profitability increase with higher bond yields.
We will seek friendship and goodwill with the nations of the world, but we do so with the understanding that it is the right of all nations to put their own interests first.
The president’s powers are limited by the US constitution except in two key areas: war and trade. We have to hope that this bodes well for Trump’s approach to dealing with foreign nations.
“We will follow two simple rules; buy American and hire American.”
The key threat to global trade is the rise of protectionism and de-globalisation - a potential risk to some emerging markets.
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