What a Trump Presidency Means for the Stock Market
It’s 9:30 a.m. and you’re already late for work. You probably got caught up at home, maybe with the kids, or perhaps you had just overslept.
In any event, it’s been an especially rough year for you. You’ve been fighting for a key promotion, but you haven’t been making the best decisions at work and it seems to be slipping out of your grasp... The promotion is being announced today, and being late certainly won’t help your chances.
You arrive to the lobby and approach an open elevator car. You spot a colleague and make eye contact with him as the elevator doors begin to close. You lengthen your stride and call out for him to hold it, but he just throws you a snide, demeaning smirk...
Before the cables start pulling him upward you hear his muffled words from behind the doors: “It’s never going to happen. You might as well just resign!”
The words sting hard, but you can’t help but consider that maybe he’s right. As you take the next available elevator to the top floor, you look nervously at your watch and reflect on your recent failures. Sure, the competition is weak, but you’ve been drawing up conflict and the entire office seems to have turned against you...
For your entire life, you’ve felt invincible, but for the first time ever you consider that maybe this could be it. Maybe this is where you finally lose...
But it isn’t... and at the end of the day you find yourself shaking hands with the board of directors. After all the criticism, after all the doubt, you’ve finally won. It feels a bit surreal. It feels a bit scary. But most of all it feels really good.
The next morning at the office you’re not just on time, but you’re hours early. You may have won the promotion, but you also know the real work has just begun. It’s time now to show all the doubters that you were right and they were wrong. It’s time to show the company (and maybe even yourself) that you can really do what you say you can.
In the lobby once again, you approach the elevators and spot the same man from the morning before. You feel a sense of déjà vu as the doors begin to close, and you start to call out... But this time, before you can even utter a word, his arm reaches forward to hold the car for you. The words are clear as day through the open doors: “No rush sir, I’ve got this for you.”
Brown-Nosed and Orange-Lipped
Less than one week ago, most of the world establishment was openly campaigning against now U.S. president-elect Donald J. Trump. The rhetoric against him was both riotous and strong. Many celebrities vowed to leave the U.S. if he were to be elected. Political and business leaders all across the world sneered and mocked the man who they never fathomed could take the White House.
But now that the "unfathomable" has actually happened, the establishment’s tone has quickly changed, and the false hysteria has (mostly) quickly subsided. Jeff Bezos, who once offered to send Trump to space, has offered his congratulations. The Bush family, who publicly came out against Trump, has done the same.
Mark Cuban, who was highly critical and instigative of Trump, now says we should all support him. Saudi Arabia billionaire Prince Al-Waleed Talal, who told Trump last year he was a disgrace and called for his withdrawal from the presidential race, is now sporting a brown nose and spray-tan-orange lips.
For Donald J. Trump, this has all obviously been a "yuge" victory. We can only assume how much the man’s ego is booming right now.
For the market, it’s all been a relative sigh of relief. After severe panic selling on election night, as traders dealt with the shock of a Trump presidency, Trump stood up on stage with a unifying message, Clinton graciously accepted defeat, and Obama reassured the public that no, this was not going to spark a second American civil war.
After the dust had settled, the market didn’t just recoup its losses from the initial “Trump Shock” but actually closed Wednesday up a full percentage point. All the nervousness surrounding the election has faded, and the traders went back along with their business.
Carl Icahn, who has supported Trump from the start, even bought $1 billion in stock on the dip...
At the same time, there are still a few investors out there who remain intensely, if not irrationally, fearful of a Trump presidency. Kurt Eichenwald of Vanity Fair, who humorously announced that he has sold all stocks in his kid’s education accounts, is just one example.
In speaking to a list of over half a million investors, I’m sure there are at least some of you who remain worried about the markets under a Trump presidency. I’d like to take this moment to assure all of you, then, that these worries are largely unwarranted. Do not sell your stocks just because Trump’s coming to the White House. Do not mess around with your children’s futures because of your political beliefs.
I say this not because I think Trump is going to be a great president (though we can all only root for him now that he is), but because I know he’s just one man in a strong system of checks and balances.
Without a super majority, the Republicans will still have to negotiate. Even if Trump really were the Hitler-incarnate the mainstream media would have you believe, we’re not going to see the dystopian world that progressives so irrationally fear. Simply put, Donald Trump will not go unchecked.
So when it comes to the market, people like Kurt Eichenwald are simply wrong to be panicking right now... at least so long as they’re panicking because of Trump.
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Moving into a Dirty House
Although Donald Trump will not be the cause, we are almost certain to see a recession under his watch nonetheless. This will occur not because Trump will enact policies that immediately destroy the global economy, but because years (if not decades) of bad policy are finally catching up to us.
When the economic powder keg blows, the Democrats are almost guaranteed to point their fingers at Trump, the same way the president-elect once irrationally blamed George Bush during the Republican primaries for 9/11 happening on his watch. This idea, though, that anything that happens under a president’s watch is their fault (especially in the first one to two years), is simply hogwash.
The reality is that government policies rarely have an immediate and measurable economic effect. Obamacare, for instance, was signed into law back in 2010. It wasn’t until this year that we’ve begun to truly realize premium increases.
Unfortunately for Trump, this is how the political game is played. The failures of one’s predecessors become one’s defining challenges in office, and for Trump that means truly enormous debt and interest rates that have nowhere to go but up. The system, quite simply, is long overdue for a shock.
Of course, karma can come back to bite you sometimes, and Trump hasn’t exactly been scoring brownie points with the Fed. While sources suggest he will not be calling for her resignation, Trump has previously stated that Janet Yellen should be "ashamed of herself" and has indicated he will not be nominating her for another term.
This means Trump will have to wait another 16 months until Yellen’s term is up in February 2018. By then, interest rates will likely be moved back up as Obama is safely out of office and Trump is there to bear the blame. At least that’s how I see it playing out as of today.
In any event, we should all know by now the market is due for a downturn and that neither a Clinton win nor Trump win would have been enough to change that. Effectively, stocks haven’t moved anywhere since 2014, and the downside catalysts are too prominent to ignore any longer.
While this doesn’t mean you should panic and sell everything today, it does mean it’s a good idea to begin lowering your exposure to stocks if you haven’t already. In the event of a crash, cash will be king (so you can buy the dip), while gold and Bitcoin will be key engines for hedging.
The next four years will be an interesting term for investors, to say the least.
Until next time,
Jason Stutman is Wealth Daily's senior technology analyst and editor of investment advisory newsletters Technology and Opportunity and Topline Trader. His strategy for building winning portfolios is simple: Buy the disruptor, sell the disrupted.
Covering the broad sector of technology and occasionally dabbling in the political sphere, Jason has written hundreds of articles spanning topics from consumer electronics and development stage biotechnology to political forecasting and social commentary.
Outside the office Jason is a lover of science fiction and the outdoors. He writes through the lens of a futurist, free market advocate, and fiscal conservative. Jason currently hails from Baltimore, Maryland, with roots in the great state of New York.
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