Are US stock markets ignoring political actions against Donald Trump at their peril?

When Donald Trump was installed as president of the USA many critics believed that he would harm overseas relations although many thought that he would do more than any other recent president for the US economy. While there is no doubt that he has not exactly “helped” overseas relations there are growing concerns that he has been slow off the mark with regards to economic policies with other politicians and federal agencies plotting against him. So, are US stock markets ignoring political actions against Donald Trump at their peril?

Little room for error

As we have mentioned on numerous occasions, the so-called “Trump bounce” continues with stock markets flirting with all-time highs. Many analysts have commented on the fact that valuations are looking stretched on current economic forecasts which suggest that investors believe the economic environment will change very quickly. If this is the case, and it is something which Donald Trump has always championed, why is he taking so long to announce his new economic policies?

Are US stock markets ignoring political actions against Donald Trump at their peril?
Will Donald Trump succeed?

There is a real danger that so much anticipation is now placed in stock market valuations that even the slightest degree of disappointment could see a significant correction.

Political hurdles

We only need to look at the political environment in the USA to see how toxic Donald Trump has become in some quarters. Despite the fact he is the president of the USA, voted in with a legitimate mandate, many politicians are refusing to work with him and the FBI recently announced it was investigating his connections with Russia. This is not the kind of environment which will clear Donald Trump’s brain to focus on the economy and the US employment market. At the moment stock market seem to be ignoring this fact and are happy to keep on pushing prices higher and higher in anticipation of the promised-land being delivered by Donald Trump.

Whether you think there are political shenanigans going on behind-the-scenes to reduce the influence of Donald Trump there is no doubt there are many legitimate and illegitimate hurdles ahead of him.

Investor momentum

Momentum is a very important factor in any stock market and there is no doubt that the momentum is certainly upwards with regards to US stock markets. Even the most bearish of analysts have been forced to change their views as stock markets continue to go from strength to strength. This momentum can, and likely will, change very quickly if we see any potential problems ahead. There is extremely little room for manoeuvre with regards to Donald Trump’s future policies and, more importantly, their success.

It is also worth noting that the Federal Reserve, recognised as an independent body, seems to be running policies totally at odds with President Trump. Again, this is not good for the US economy if very strong parties are pulling in very different directions. Surely now is the time to let Donald Trump concentrate on his economic policies and if he gets them wrong, as many believe he will, then they can turn round and say I told you so. If however he does deliver and increases economic growth from under 2% to around 4% then many of his critics will be forced to eat their words.

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