No one thought he was going to run for President, and he did.
No one thought he would ever get the Republican nomination, and he did.
No one sure as heck ever thought he would win the Presidency, and he did.
When he did win, the majority of pundits thought the stock market would crash, and it did just the opposite.
Now, President Trump will shock the world and the financial markets again because no one expects his administration to get anything done. The mainstream media hates President Trump. That is not a political statement. That is not an opinion. That is a fact. Because they hate Trump, the media constantly tells the public that he is unfit to govern and he won’t get anything accomplished for the next four years.
My first response to this is BE PATIENT! It takes time to get things done in Washington. For example, most big bills can be 2,000 to 5,000 pages. There’s a great deal of time involved to draft these documents, negotiate the details between both parties, and eventually get enough votes to pass a bill through Congress. In addition, it doesn’t help that our Congress is so dysfunctional and doesn’t want to work. With the mid-term elections coming up next year, they have no choice but to get moving on these reforms or else many will be out of a job.
My second response is Trump’s administration has something to prove. Whether you like the members of his cabinet or not, it is tough to argue that many of them have been EXTREMELY successful in business and have a history of getting things done. Secretaries Mnuchin and Cohn especially want to prove that success in the business world can translate to success in government.
I’m sure you’re thinking “What specifically will Trump do to shock the world?” It can be one or more of the following: corporate tax reform, personal tax reform, health care reform, tax cuts, repatriation of foreign money, infrastructure plans, etc. Progress in any of these areas is NOT priced into the market and could be a significant catalyst this fall. For example, a reduction in the corporate tax rate can add $10-$15 in earnings to the S&P 500 and easily spark a 10% move higher.
Personally, I think Trump started off on the wrong foot by tackling health care. It is a complicated mess that involves too many moving parts and will definitely take time to repair. An easier task would be to start with repatriation. Many American-based companies who generate profits overseas leave that money offshore because they would rather pay single-digit tax rates locally than pay 35% to bring it back into the United States. If Trump offered these companies a one-time 10% tax rate to bring that money back, and announced that he would use the capital for an infrastructure plan, not only would trillions of dollars pour back into the US banking system, but it would also be a plan that both sides of the political aisle can get behind.
You might also be thinking “What if Trump doesn’t get anything done?” I feel the stock market will still perform well because of the amazing inventions that continue to revolutionize our lives. These include improvements in smart phones, autonomous cars, machine learning, artificial intelligence, and the “Internet of things.” Experts estimate that we will see over 50 billion connected devices by 2020. With or without political progress, these tremendous changes in technology are helping companies drive growth, productivity, and profit margins.
I will leave you with one final thought. Think of everything that’s been thrown at the stock market over the past few years: geopolitical concerns, dramatic elections, viruses, hurricanes, nuclear missile launches, Brexit, terrorist attacks, and guess what? The market has been incredibly resilient and literally brushes off all bad news. Now, imagine if we actually get some good news? The mainstream media has brainwashed the American public that nothing will get done in the next four years and sentiment is very negative because of that. I would like to emphasize that this article is not a political statement. It is simply my analysis of what could happen in the stock market. I am confident that this new administration will accomplish a great deal over the next few months and it might send shockwaves across the financial markets, but this time in a positive way.
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