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Do we know what a Trump presidency means yet?

27 April 2017

Jonathan Marriott, Chief Investment Officer

At the time of Donald Trump’s inauguration I likened Trump to an Easter egg in my blog post ‘Under the wrapper’: a Republican cardboard box with a gold wrapped egg concealing what was inside. We would not know what a Trump presidency would mean until we cracked open the egg on Easter Sunday. Easter has passed and we have seen the first actions of the new president. Sadly, while his intentions have become a little clearer, we are still left in doubt as to what his presidency means in practice.

Predictably, he introduced health care reforms and travel restrictions on predominantly Muslim countries. However, both these measures have run into problems. The travel ban has been introduced twice and both times successfully challenged in court and his repeal and replacement of Obama care was rejected by Congress despite a Republican majority. It appears that we are now looking at what can he do rather than what does he want to do. Healthcare was one source of reduced spending that could have allowed him to cut taxes. As a result, budget negotiations may be difficult and his plans to spend more and cut taxes may also run into opposition.

In terms of his campaign rhetoric, Trump’s actions in Afghanistan and Syria are on the surface harder to understand. His comments on North Korea and movements of US forces on that front only add to the view that he is trying to re-establish the US as the world’s policeman. On the campaign trail he was critical of involvement in overseas conflicts with “putting America first” as his leading slogan. A dose of the reality of conflict in Syria seems to have sparked a change of mind. He will now need China to help deal with North Korea which could explain why there has been less talk of referring to the Chinese as ‘currency manipulators’.

So, if he can flip flop on international policy and domestically he is finding it hard to put his words into action, do we yet know what is underneath the Easter egg’s wrapper? He is proving hard to predict and, like many incumbents new to high office, it is easier to criticise from the sidelines than it is to be in the centre of the field. The next stage will be tax reform and his plans to increase spending on infrastructure, however both these areas are fraught with difficulty when it comes to detail.

For now many of the investments that outperformed on the Trump election victory have given ground relative to the rest of the market. The so called ‘Trump trade’ has largely reversed. We will watch developments closely to see what he can do rather than what he wants to do. For now, this Easter egg is still keeping many of its secrets hidden.