Trump Factor

Pfäffikon SZ, Switzerland – “It’s the economy.” Bill Clinton’s campaign in 1992 shifted the focus on the economy to defeat George H.W. Bush. Donald Trump performed the ‘light’ version of this successful concept. Even though Trump received 2,864,974 votes less than Hillary Clinton, he became the new President of the US. Meanwhile, Trump has become a real headache to the financial markets.

Pigeon House
Many things do not matter anymore these days. North Korea, Russia; it does not occupy the investor’s emotions anymore. However, when the name Trump falls, everyone wakes up. Trump was the enlightenment for the market first; now he slowly becomes a millstone. The beautiful White House has quickly been transformed into a pigeon house that has lost all its grace. Angry tongues claim that both Republicans and Democrats prepare an impeachment as the sentiment around Trump is slowly turning.

The question is if it will come that far. The economic facts are still in favor of Trump. The stock markets are doing well since Trump’s appointment, and business figures are not bad, even though you have to put them in another –historical– perspective. The Fed properly carries out her job, raises interest rates slowly and is also planning to reduce her huge balance sheet.

However, fiscal incentives are lacking behind. Trump uses Reagan’s principle in the eighties of the last century. In 2018, growth in the US will fall back due to disappointing fiscal stimulus, is our expectation. Nevertheless, the US economy will remain relatively strong. A baptism of fire Trump gets at passing the US budget. This, as you may remember, is often an amateurish battle. It is obvious that Trump will have an extra hard time at this point.

Trump is the hostage of the Republicans. However, with a slight economic wind in the back, the team of Trump will benefit. Fiscally ingrained Conservative Republicans will eventually support Trump, provided that the economy continues to run as promised. Although many speak of an impending impeachment, the facts point rather to a second term of Trump in the US.

It remains for me to wish you a good weekend.

Jan Dwarshuis is CIO at Thirteen Asset Management AG. Dwarshuis writes his columns in a personal capacity. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in above mentioned shares and has no intention of doing so in the next 72 hours.