RCG Blog

TRUMP – Now What?

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I was greeted by just shy of two dozen email and texts this morning asking about Trump’s victory and how it will impact the stock market and the economy. Here are my initial thoughts. A deeper dive into the individual issues will come in later posts.

Regarding the stock market: People have not accurately explained why volatility exists in these circumstances. The market didn’t “favor” Hillary, it favored certainty. Clinton was viewed as a continuation of Obama, good or bad. Trump was viewed as an unknown. This means the market now needs to “price in” a Trump presidency. This could take a couple of weeks or even a month, there is no way of telling. If he is humble, calls for unity, and the GOP gives the impression that the BS (that came from both sides) is coming to an end, then expect things to stabilize. Also keep in mind that the market was already overvalued by at least 5% and a correction was coming regardless. Trump is playing with house money on that first 5%, but losses above that are on him. Attitudes need to change, and “bigly.”

Regarding overall economic conditions: Since the economy isn’t operating with significant excesses, we are not on the cusp of a recession, although Trump will be inheriting one in his first term. There will be discussions about tax policy and international trade, but the newly elected President will soon find out that the U.S. economy is more complicated than a real estate deal. What sounds good when one is an “outsider” often looks different with more information. On the consumer side of things, there is almost nothing left to shock us. Aside from some volatility in stock prices for a bit, consumers are likely to pick up where they left off and hopefully spend some money and have a nice holiday season.

At some point we need to discuss what parts of Trump’s tax plan work and what is not mathematically possible. Same on trade issues. That will come after a weekend of watching football, drinking a few beers, and trying to forget about politics for a couple of days.

Author’s note: If there is a particular economic or policy issue you would like covered in a later publication feel free to send your ideas and/or comments to info@roundsconsulting.com. 

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  • Lysa Romain-Endyk - November 9, 2016 reply

    Thank you Jim, for this information. I think the initial reaction from people, especially Clinton supporters, is to panic. This scenario would likely happen no matter who the candidates were – when one is known and the other unknown. Hopefully your info will help level the thought process… and stop the panic.

  • Bill Sheldon - November 10, 2016 reply

    Good start, Jim. I’m really hoping to learn a lot as soon as the dust settles.

  • Anonymous - November 15, 2016 reply

    Jim,
    With the R’s controlling both ends of Pennsylvania Ave for the first time in several decades, the first 100 days will be crucial. They need to work on the economy first focused on tax cuts and deregulation first. Repeal and replace Obamacare may take a bit longer; and Issues like immigration reform and trade policy much longer. But, tax cuts, particularly to bring enormous offshore profits back home, will improve short and long term economic growth which in turn will drive a fiscal dividend to help address other goals including infrastructure investment. I am optimistic that gridlock can be substantially loosened, albeit not entirely removed due to cloture rule (filibuster) in the Senate.

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