The markets where brieflly shaken on historic Trump election by quickly recovered and rallied to new highs on the opening of the US markets. Republican control of the House and Senate has ended of political gridlock a chance at a balanced growth policy.
Discounting some of Trumps more populist comments, like building a wall (albeit if Mexico pays!) His potentail business and tax changes could ignite growth not seen in decades. We might be in for a heady growth period we have not seen since President Reagan ignited America’s inner business spirt in the 1980s. Reagan was castigated in a very similart way by washington and media elites.
What might we see:
Massive Infastructure bill to upgrade America roads, air, rail and energy highways – attached to this bill will be incentive for US companies that hold an estimated $2.4 Trillion offshore to reprataite funds at an attractive tax rate (10-15%). This alone could raise $300 billion dollars to fund infrastructure projects.
We could see long term tax relief for US companies to bring corporate tax rate in line with rest of the developed world; at 35% it stands as one of highest. A Twenty percent rate would spur investment, R&D and profits.
Roll back of over regulatory aspects in banking (Dodd Frank) to allow smaller bank to expand lending, Healthcare (under Obamacare) may benefit. Energy industry could benefit from a lighter regulations and renegotiation of the Iran oil deal, which would help stablize prices.
The defense industry could also benefit as Trump and the Republican party are historically pro-defense. Trump has said he would see other countries pay more for defending their borders rather than living free under America’s defense umbrella. Stocks such as Lockheed Martin and General Dynamics will benefit.
With government fiscal policy in full swing you would see less reliance on monetary policy and as such the US Federal Reserve will be able to gradually raise rates – look for .25% in December and an additional 1% in 2017 calendar year.
What all this means for US equity markets is strong earnings and growth in 2017 in many different sectors.
An outlyer investment might be the Emerging markets as a stronger US economy will mean better growth in developing countries. Investors with should keep an eye on near term entry point as many emerging market stocks such as Mexico and Southeast Asian have tumbled sharply on trade and currency concerns and may recover favourable on. Investment in a diversified emerging market fund might be the best approach.