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Point of View

Trumponomics: the good, the bad and the ugly

By Matthew Brittain, Investment Analyst

Donald Trump may have only just arrived at the White House, but he’s certainly making his presence felt. We rather hoped that the aggressive and antagonistic pre-election Trump would morph into a slightly less belligerent president. Not so. In fact, he looks set to follow through on most of his promises – for better, and for worse.
While we may not agree with his approach, he has acted quickly on what he said he was going to do. This gives us confidence that his pro-business policies will also follow through, and equity markets will respond well to that. However, markets are also capable of reacting emotionally, deserting rational logic in the immediate aftermath of surprise announcements. We should therefore be wary of how they will react to the unpredictable nature of the man himself.


Trump is able make unilateral trade decisions, and the potential impact of his proposed tariffs, plus the abolishment of existing trade deals, remains uncertain. On the one hand, US-based employers and manufacturers should benefit in the short term. But stemming the flow of cheaper imported goods will likely give rise to inflation, and the average US consumer will be able to buy less as a result. At the same time, other countries, such as China, could impart their own tariffs on the US, making it more difficult for American businesses to export their goods.
Interestingly, Trump appears to be subtly trying to devalue the dollar (by stating that the euro is undervalued, for example), presumably with the intention of making the US more competitive on the international stage. This will be a short-term move, and a clever one if it pays off.


On the face of it, immigration policies are likely to have little impact on financial markets. In reality, the reverse could be true. Changing demographics are having an effect on productivity in the western world, with a significant rise in retirees relative to the rest of the workforce. There are only two ways of reversing this trend – increasing birth rates (which will take time to positively impact productivity), and immigration. While Trump’s changes to immigration have so far yielded an emotional response as opposed to an economic one, the longer-term impact of closing borders could have far-reaching consequences.

Infrastructure spending

Trump’s intention to cut taxes while funding significant infrastructure investment has certainly had the desired effect on global equity markets. They have quickly priced in higher future US growth. The promise of new airports, roads, bridges − and a new wall − will provide jobs and prosperity in the short term, and should improve productivity in the long term. Of course, it comes at a cost, and only time will tell if rising GDP will offset Trump’s ambitious spending plans (currently at around $5 trillion, versus an estimated $250 billion had Clinton got into office).

In summary

The reality is that we don’t yet know the effect Donald Trump will have on the global economy. But if there’s one thing markets have shown us, it’s that there is no need to panic. His policies breed both fear and hope, and will likely result in both positive and negative outcomes. But that would be no different to every other US president that has gone before him. In the meantime, fasten your seatbelt. It’s going to be one heck of a ride.

Investing involves risk and the value of investments and the income from them may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.