Trumponomics and the coming reflation

[tinhat]

Trump in the White House. Republicans in control of the House and Senate.

What is the coming reflation of Trumponomics likely to look like?

What stimulus is proposed?

• Income tax cuts for the rich and middle.
• Corporate tax slashed from 35% to 15% (also designed to repatriate US corporate money held offshore).
• $US1 trillion infrastructure blitz.

But wait - what about the threats to tear up the trade treaties and wack punitive tariffs on China and Mexico? What about Trumps threats to NATO, the world order and security and the empowering of Putin?

What will be the economic impacts? Inflation (reflation) and the rise of interest rates back into normal territory. Blow-out to US federal deficit and sovereign debt position.

What will be the effects on equity markets? Which sectors will be the winners and losers?

 

[qldfrog]

Trump in the White House. Republicans in control of the House and Senate.

What is the coming reflation of Trumponomics likely to look like?

What stimulus is proposed?

• Income tax cuts for the rich and middle.
• Corporate tax slashed from 35% to 15% (also designed to repatriate US corporate money held offshore).
• $US1 trillion infrastructure blitz.

But wait - what about the threats to tear up the trade treaties and wack punitive tariffs on China and Mexico? What about Trumps threats to NATO, the world order and security and the empowering of Putin?

What will be the economic impacts? Inflation (reflation) and the rise of interest rates back into normal territory. Blow-out to US federal deficit and sovereign debt position.

What will be the effects on equity markets? Which sectors will be the winners and losers?

Naaa, look asx up 3% today...

 

[Gringotts Bank]

But wait - what about the threats to tear up the trade treaties and wack punitive tariffs on China and Mexico? What about Trumps threats to NATO, the world order and security and the empowering of Putin?

What will be the economic impacts? Inflation (reflation) and the rise of interest rates back into normal territory. Blow-out to US federal deficit and sovereign debt position.

What will be the effects on equity markets? Which sectors will be the winners and losers?

He'll soon find out that many of those trade policies have downsides locally, but I expect watered down versions to be implemented. US will return to prosperity and the rest of the world will be like "oh, you seem to be doing well... what about us?". Politicians here and in Europe may finally wake up to the fact that their job is to inspire local prosperity through confident leading, rather than constant tiptoeing around minority groups. Leading has just as much to do with confidence as policy - most pollies just don't get that. They are figureheads... symbols - that's their role. Trump understands that (I think).

 

[McLovin]

But wait - what about the threats to tear up the trade treaties and wack punitive tariffs on China and Mexico? What about Trumps threats to NATO, the world order and security and the empowering of Putin?

The TPP is probably a non-starter now. NAFTA won't get repealed, and tariffs on Chinese goods will last as long as it takes a Trump supporter to waddle into Wal-Mart and see the prices on everything they want to buy just went up 30%. Manufacturing like they had in the 1970s is a pipe dream; Trump knows that.

I think he'll probably tread carefully on foreign policy. His victory speech was like a different person.

 

[Gringotts Bank]

His victory speech was like a different person.

No it wasn't. You just couldn't see past the surface level bluster, like most of his detractors.

 

[tech/a]

I really hope the guy leads and does stir up the big money without being a puppet.
Could teach a few OR could be a big nothing!

 

[pixel]

This guy paints ONE possible scenario:
http://www.marketwatch.com/story/a-...dangerous-2016-11-09?mod=MW_story_top_stories
Let's hope he will be proved wrong.

 

[smallwolf]

every man and his dog has an opinion today about what he will/wont/might/cant/etc do. I think the reality is that 'we' don't really know what he is going to do... The ABC TV is asking these sorts of questions now. And while he is president, he is now part of the machine which is larger than 1 person.

 

[McLovin]

This guy paints ONE possible scenario:
http://www.marketwatch.com/story/a-...dangerous-2016-11-09?mod=MW_story_top_stories
Let's hope he will be proved wrong.

And a different opinion that says Trump will act with nothing but self interest...

For these constituencies, Trump possessed a tremendous advantage over Clinton: he was the physical incarnation of the irreverent entrepreneur who had made good on the great American dream. By way of superficial contrast, Clinton represented the self-pandering system that stifles and thwarts the hard-working entrepreneur's aspirations via bureaucratic ineptitude, taxes, red-tape, corruption and dud deals with global rivals.

Time and time again Trump's willingness to ruthlessly sell whatever messages gave him the best chance of winning the White House—even if they were lies or contradictory—enabled him to defy expert opinion on his demise.

A significant insight is that this maniacal self-interest and logic should apply with equal force to Trump during his presidency. Our expectation was, therefore, that once Trump assumed power, he would do everything possible to maximise the value of his personal financial interests, which unlike his predecessors, remain vast, varied and heavily reliant on the performance of the US economy, and property particularly. With the Republicans retaining control of the senate, this was likely to be the most business and financial markets friendly regime in a long time.

It is misguided to conceive of Trump as irrational, a radical reformer, or a right-wing zealot—history suggests he is none of these things. While one can quibble with his ethics, morality, consistency and personal style, he is unambiguously the pure American profit maximiser that carries the confidence, conviction and narcissism that accompanies those who have experienced extreme success through skill and that other crucial condition precedent, luck.

This framework for thinking about Trump made the ensuing victory speech, which triggered an extraordinary recovery in markets, easier to anticipate. While the trademark idiosyncrasies might continue to irritate, Trump never once alluded to his polarising political narratives on immigration, trade, or Clinton's corruption.

Instead I was presented with an entirely different visage: an inclusionary president who graciously lavished complements on Clinton for the battle she waged and her service as secretary of state, and who declared that his primary task would be creating the best performing economy in the world that afforded opportunities for all Americans to fulfil their potential.

Trump placed his greatest emphasis on revitalising infrastructure spending, which markets have since latched on to. Yet it should be no surprise that a man who spent his entire professional career developing commercial and residential properties would make rebuilding America's transport infrastructure, hospitals, and schools a primary political goal.

The mercurial Trump nonetheless remains. There are absolutely risks that his self-confidence and hubris result in him regularly running off-reservation in public remarks that cause temporary mayhem in markets. But I am guessing that his actions will be collectively geared towards supporting business and growth and removing obstacles to both.

One consensus view in the hours after the election was that the Federal Reserve's December rate hike was dead. We countered that the Fed would still likely hike because markets would figure out that Trump is a friend, not foe, and could be quite inflationary.

Read more: http://www.afr.com/news/world/us-el...ood-for-markets-20161109-gsm216#ixzz4PYumPDnW

 

[tinhat]

If interest rates rise over the medium term I expect yield play stocks prices to come off (except the banks, they are probably at the bottom of their cycle).

 

[Gringotts Bank]

Anyone who crosses him will come a cropper, but if people side with him, he'll look after them. I don't like that sort of trait, but it has potential upside. As a narcissist, he'll go to great lengths to maintain what he sees as important - wealth, status and beauty. He's done that in his personal life and if he decides to "adopt" America as his extended family, then prosperity will follow for the whole country. The rest of the world won't get a look in until he has changed things for the better there, and he will move mountains to make it happen. He will be so focussed on the US that the rest of the world will suffer a sense of neglect, and that's why I think markets are headed lower. Sentiment rules.

Yesterday at the NY polling booths, there was a glimpse of what underlies the narcissism. A micro-expression shot across his face when the home crowd booed him, momentarily flinging him back against a deep sense of rejection that he's spent a lifetime repressing. He's strong enough to maintain his self image for two terms. In that time America will undergo what Victoria did under Kennett - massive increase in wealth and status. Then people will get sick of it, vote against him, and then ....

cheers,

Frasier

 

[satanoperca]

A lot can happen in a few months, he is not in power until the 20th of Jan next year.

I believe if we see 10% of his ideas come to reality it will be a miracle.

 

[skc]

Truth is stranger than fiction x100.

https://www.theguardian.com/us-news...-predicted-president-trump-back-to-the-future

 

[Klogg]

(except the banks, they are probably at the bottom of their cycle).

A little off topic - but that's a huge call.

B&D debts haven't risen much from their lows, they'll all need additional capital soon and I would expect APRA to be silently turning the screws on them regarding their mortgage books

 

[sptrawler]

If interest rates rise over the medium term I expect yield play stocks prices to come off (except the banks, they are probably at the bottom of their cycle).

I tend to agree with you, on that one. If interest margins start increasing, the banks will have a field day.

 

[OmegaTrader]

TLDR;

He will do bugger all or He will go into a spending frenzy, which is really good for now but later generations will bear the brunt when the sovereign crisis finally bubbles over.







Trump has two jobs economically

1) Improve equity
2) Improve growth


Imagine If you are Trump or the government

How do you improve the economy/growth

1) Spend
2) Print money
3) Improve efficiency


Spend

You can't spend money you don't have
So you borrow or you have a surplus

But if you keep borrowing>>> You are just pushing the burden on to the next generation until the interest costs become too large,
Unless the spending generates a return it is dead money. Government projects are notoriously bad for inefficiency.

To run a surplus is also hard, politically it is very difficult and in the short term it will hurt the economy.


Print money

Trump can't print money that is the Feds job, which is going to the max over recent years and because inflation
will cause a rebellion if it gets too high


Improve efficiency

This is the best way.

But again this is hard. Efficiency takes along time and reforms are hard fought.

There are a lot of hands in the pot.

Move spending away from foreign affairs and bureaucracy and into labour, is not efficiency it is simply re- balancing.



Improve equity

There is no point in trump improving the economy if it does not get shared with his voter base

Trumps election is part of the bigger picture.

1) The US financial sector with support has too much influence which the government has and still has failed to regulate


I have no hope Trump can change this

The financial sector is skimming of all of the cream by not paying people a reasonable wage, paying themselves too much and avoiding taxes. Who wouldn't if they could get away with this

2) Technology is killing labour

I have no hope trump can change this

Automation is eventually going to cause the second Luddite rising around the world.....


3) Immigration and globalisation has been to unplanned around the world and is undercutting the US workforce

Immigration is undercutting wages especially immigrant labour and once again through technology, and overseas manufacturing

Trump can try and change this


So what can trump do within his power

A) A massive stimulus program by borrowing money

B) Reform immigration and overseas manufacturing

C) Reform Labour

D) Shift spending to middle class programs


I think he will Do A and D and maybe B if he has the balls


But I am the pessimist,

So I think the outcome will either be

He will do bugger all or He will go into a spending frenzy, which is really good for now but later generations will bear the brunt when the sovereign crisis finally bubbles over.


My

 

[superbatman]

TLDR;

He will do bugger all or He will go into a spending frenzy, which is really good for now but later generations will bear the brunt when the sovereign crisis finally bubbles over.







Trump has two jobs economically

1) Improve equity
2) Improve growth


Imagine If you are Trump or the government

How do you improve the economy/growth

1) Spend
2) Print money
3) Improve efficiency


Spend

You can't spend money you don't have
So you borrow or you have a surplus

But if you keep borrowing>>> You are just pushing the burden on to the next generation until the interest costs become too large,
Unless the spending generates a return it is dead money. Government projects are notoriously bad for inefficiency.

To run a surplus is also hard, politically it is very difficult and in the short term it will hurt the economy.


Print money

Trump can't print money that is the Feds job, which is going to the max over recent years and because inflation
will cause a rebellion if it gets too high


Improve efficiency

This is the best way.

But again this is hard. Efficiency takes along time and reforms are hard fought.

There are a lot of hands in the pot.

Move spending away from foreign affairs and bureaucracy and into labour, is not efficiency it is simply re- balancing.



Improve equity

There is no point in trump improving the economy if it does not get shared with his voter base

Trumps election is part of the bigger picture.

1) The US financial sector with support has too much influence which the government has and still has failed to regulate


I have no hope Trump can change this

The financial sector is skimming of all of the cream by not paying people a reasonable wage, paying themselves too much and avoiding taxes. Who wouldn't if they could get away with this

2) Technology is killing labour

I have no hope trump can change this

Automation is eventually going to cause the second Luddite rising around the world.....


3) Immigration and globalisation has been to unplanned around the world and is undercutting the US workforce

Immigration is undercutting wages especially immigrant labour and once again through technology, and overseas manufacturing

Trump can try and change this


So what can trump do within his power

A) A massive stimulus program by borrowing money

B) Reform immigration and overseas manufacturing

C) Reform Labour

D) Shift spending to middle class programs


I think he will Do A and D and maybe B if he has the balls


But I am the pessimist,

So I think the outcome will either be

He will do bugger all or He will go into a spending frenzy, which is really good for now but later generations will bear the brunt when the sovereign crisis finally bubbles over.


My

Trump is a businessman, yes a looser where money matters. Its not only about America, his wrong moves may lead the whole world into great recession.
Hope being a president, he needs to show some responsibility on every matter. I completely agree to his reshoring policies. Compiling domestic companies for reshoring will create immense job opportunities and improved cash flow. http://www.bayviewmetals.com/blog/reshoring/seven-benefits-of-reshoring/
Another advantage that I see on this policy is that reshoring will definitely affect the GDP of China, Philipines, and India. I am sure that the lion share of China's GDP will be affected by his policies.