In an election night shocker, Donald Trump emerged from the presidential election as the victorious candidate. The Republican Party also retained control of both chambers of Congress. As the election night drama unfolded, the markets initially plunged -5% with the Dow futures trading down over 700 points. But it didn’t last long.
In a year where the markets have provided little in the way of returns, investors suddenly appeared eager to buy Trump’s campaign promises hoping they would turn into sustainable investment themes, kicking off a two week stock market rally.
While the campaign focused more on personal attacks than policy, Trump’s latest video outlines his plan for the first 100 days. His primary initiatives:
1) Trade, 2) Energy, 3) Regulation, 4) National Security, 5) Immigration, & 6) Ethics Reform.
These efforts combined with several ideas/theories conveyed on the campaign trail are providing the initial framework for potential investment themes during his presidency.
- Infrastructure Spending: One policy Trump has vocally supported has been a federal spending package to repair our nation’s infrastructure and create jobs. Many analysts see this as an economic positive, providing a fiscal policy counterpart where monetary policy has been “going it alone” for so long.
- Jobs, Taxes, and Trade: With jobs being a top priority, Trump promised to renegotiate NAFTA, implement tax reforms, and pledged action on Obamacare.
- Ending the Gridlock?: While total Republican control could spell the end of the gridlock that has brought Washington to a standstill, the outcome is far from certain. Trump’s agenda will surely face opposition from both Democrats and Republicans.
- Deregulation: Focusing on removing the “regulatory burden,” it is more than likely that new regulations will be avoided and existing regulations rolled back. Three sectors most likely to benefit from this deregulation are Financials, Energy, and Healthcare.
So will President-Elect Trump be able to “Make the Economy Great Again”? It is simply too soon to tell what the election will mean for the U.S. economy or for financial markets around the world. A candidate’s campaign promises often hit the proverbial “brick wall” of political reality once elections are won.
That being said, if his initiatives are somewhat successful, inflation and rising interest rates appear to be more likely. Deregulation should help some sectors and provide a boost to small business domestically. We should also witness a shift from the current “growth slowing” trend towards a “growth growing” again economy. As we continue to monitor the data, we anticipate shifting allocations towards investment themes poised to capitalize on the new economic and political reality.
Contact GGM Wealth Advisors with questions or concerns regarding your portfolios’ allocation.