Sunday, 1 January 2017

Donald Trump- No-one knows

When Trump won the majority of electoral votes but got the smallest popular vote since Sam Tilden  markets were aghast and fell drastically. when Trump's speech was vastly different to what he said in the campaign and then his spokespeople essentially said he would walk away from some of his campaign promises markets then assumed he was simply another politician who lied during the campaign and would implement a strongly expansionary fiscal policy.
The deficit which Obama inherited of over 10% of GDP to be now less than 3% of GDP would probably double.This lead naturally to stockmarkets rallying and bond markets falling.

After all Trump said he would:

  • cut personal income taxes
  • cut company tax
  • increase defence spending ( alah Reagan)
  • increase infrastructure spending
  • ensure entitlements not be touched
  • balance the budget
Quite obviously these policies are a mass of contradictions. No-one knows what Trump will do.

I think the best thing is to wait until we actually see what he actually does rather than speculating on what promises he will break as he must.

Take one scenario what if Trump cuts the rates in tax BUT also cuts some deductions so in net terms there is no change in tax? What if the increase in infrastructure is only giving companies a tax break.

We do  not know. I would not be surprised if markets have got ahead of themselves. It could well be another example of buy on rumour sell on fact but NO-ONE knows!

I will end by saying how ironic people crowing about the stockmarket rising because of Trump simply do not believe government spending boosts GDP.

2017 will be a very interesting year