Trump’s victory will undoubtedly go down as one of the biggest upsets in U.S. political history. Despite being written off by the D.C. elites, the globalists on Wall Street, the in-the-bag-for-Clinton news media, the know-nothing Hollywood crowd, and many in his own party, Trump pulled off a stunning victory.
Americans across the country and especially in the rust-belt states turned out for Trump in a big way. They’ve apparently had enough of the status quo from both parties.
Trump didn’t run on a traditional Republican message. He ran a populist-outsider campaign that in many ways hews to the blue team as much as it does to the red team. Trump built a coalition that is against free-trade deals that benefit big corporations and foreign governments at the expense of U.S. workers. A coalition that has had enough of Obamacare, eight years of over regulation, illegal immigration, and decades of no real income growth.
The biggest loser last night had to be the political pundits and the pollsters. Trump was laughed off the stage for telling the media he would expand the map by taking rust-belt states that haven’t gone Republican in decades. The Chuck-Todds of the world told us Trump’s goose was cooked because Clinton outspent him in ads, she had a better ground game, and her rhetoric was more politically correct.
Wrong, Wrong and Wrong! The polls never saw this coming just as they didn’t see the Brexit vote coming. There is a populist revolt building and it isn’t limited to the United States.
The initial reaction to Trump’s shocking victory has been one of fear. The stock futures markets cratered last night as it became apparent that Trump had a path to victory. Stocks have recovered much of those losses, but the Dow still opened down more than 1%.
This isn’t the typical reaction you would expect out of financial markets from a Republican sweep, but markets don’t like uncertainty. In Trump they see just that, deservedly or not.
What kind of President will Trump be? A lot will depend on what kind of policies he decides to pursue. Will Trump follow the lead of the Republican House, or put forth a more populist agenda? We have heard many generalities during the campaign, but few specifics. It’s also vital to remember that Trump literally wrote the book on deal making. Any policy proposals you have seen from him are likely just his opening bid toward further negotiation.
What we do know about a Trump presidency is that the red team now controls the House, Senate, and the Executive branch, creating the very real possibility for deregulation, tax-reform, and monetary policy reform (an issue near and dear to my heart and the hearts of many retired investors). The former two would be bullish for financial markets and the economy. A return to more sensible monetary policy could be more painful for equity markets in the short-run, but in the long-run, it is a big winner.
We also now have a successful businessman leading the country. Trump’s experience in business gives him the opportunity to put the screws to the vast government bureaucracy. Just look at how the guy ran his campaign. Compared to Clinton, he did it on a shoe-string with a skeleton crew.
That is just an initial read. As more concrete policy proposals leak out, and Trump makes his picks for key cabinet positions, we will have more on the investment implications of a Trump presidency.
For now, keep calm and carry on.
Jeremy Jones, CFA
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