Today marks three months since Donald Trump won the US presidential election. In that time, the former businessman has caused ripples in the markets with such simple actions as sending out a tweet or making a phone call. He has been no stranger to controversy and, since assuming office on January 20th, he persists in attracting criticism towards his comments, choices for cabinet and, indeed, his executive orders.
Trump campaigned on a platform promising a reduction in corporate taxes in order to bring back production lost to other markets. The rally took the Dow to an all-time high, breaking past the 20,000 threshold for the first time. Still, Trump’s decision to ban visitors from seven predominantly Muslim countries affected shares in travel companies and put downward pressure on the index.
The Wheels Are Turning
Trump’s threat to impose a 35% tax on foreign cars might sound like good news for American car manufacturers, but that’s only if they produce their vehicles in the US. The new president seems to have managed to scare Ford into cancelling its plans for a $1.6bn Mexican plant and adding 700 extra jobs to its US business. While the cut in US corporate tax might help American companies, and Trump’s protectionist stance might create an advantage for them, this will all come at a very steep price that will require significant US investments before reaping any benefits.
US Confidence: Ups and Downs
Rising US bond yields since Trump’s election reflect to a significant degree what’s been happening in American stock markets. Expressing confidence in the near future for US markets, investors have been selling out of safer 10-year bonds and pouring cash into riskier assets like shares and stocks, driving up yields as demand dropped.
The greenback strengthened against a basket of six trade-weighted currencies ahead of the positive US nonfarm payrolls announcement in January, but dropped again after the figures were released. In the short term, Trump’s protectionist plans, such as scrapping or overhauling the TPP, TTIP, and NAFTA, might add extra jobs, but it remains to be seen whether the American worker is qualified for or actually wants to do the jobs that will come back from the likes of China and other emerging economies.
No More Fuel for the Fire?
Donald Trump’s backing of the Keystone XL and Dakota Access projects, while attacked by environmentalists, was widely cheered by industry players. The US President seems intent on having a close relationship with the energy sector if this and his choice of ex-ExxonMobil Rex Tillerson as Secretary of State are anything to go by. In the last three months, seeing a boost from OPEC’s production cut, Brent crude climbed back to over $50/barrel.
The price of the safe haven commodity rose to an almost three-month high yesterday amidst concerns about Trump’s policies. Investors initially felt that the new POTUS’ positive attitude towards business, his plans to reduce regulation, and his promise to decrease corporate tax signalled a positive outlook for 2017, but his decisions since taking office have brought further uncertainty into the markets.
A Taste of the Trump Medicine
Although Hillary Clinton was the first to vow to go after Big Pharma, especially in light of the Martin Shkreli and EpiPen scandals, it was Donald Trump that really managed to rattle the medical and pharmaceutical giants. A 20-minute press conference calling out pharmaceutical companies for “getting away with murder” cost industry players some $24.6bn in losses on January 11th.
Up in the Air
On December 23rd, Trump tweeted a message criticising the cost overruns of Lockheed Martin’s F-35 fighter jet. In the hours following, Lockheed shares tumbled 2%. This week, the defence giant revealed it would sell 90 new F-35 jets to the US military, in a deal worth over $700m in savings on its previous deal. When Trump criticised the $4bn price tag on the new Air Force One presidential plane in a December tweet, Boeing lost $1bn in market cap.