International Finance

Trumponomics – the markets and President Trump’s first 100 days

The 20th of January 2017 saw Donald Trump inaugurated as the 45th President of the United States. Steve Ruffley, Chief Marketing Strategist at InterTrader, takes a look at Trump’s first 100 days and how the markets have reacted.

Trump has made big statements on his vision for the economy; although these comments invigorated voters, there remains little that could be regarded as a true policy road map.

This is the problem with putting a business man in charge of a country, he is quite out of his depth in his understanding of how you make large political changes happen, and make them happen quickly. In his business persona Trump is famous for simply firing ineffective or troublesome people, and as he is quickly finding out this does not translate to a viable way to run a government.

It seems that there has been no bad news for stocks in the Trump trade, increased rates and changes to regulation have all meant one thing for the indices in the short term – record highs. The USD is in two minds with Yellen telling the markets they are trying to lay foundations for ‘sustainable growth’, while Trump says he wants ‘rapid growth’; something will have to give. The USD has performed worse than expected against the JPY. Many experts think this is the way Trump wants it, certainly any interest rate rises should have pushed the USD/JPY Closer to 113 and perhaps to recent highs at 120. The markets however, have not yet had to deal with any serious external political incidents. With North Korea now fully in the mix, and with Trump firmly on the ‘America first’ standpoint on all global aspects, his comments on not needing China have certainly seen the indices rethink getting back to record highs.  2359 in the S&P is a good pivot. This in the short term will show if the bulls or bears are in control. If Trump’s tone becomes more aggressive, the S&P can be seen falling to 2300 and if the markets see any more direct war comments then the S&P could be trading 2189 in no time.

The ultimate test for the Dollar and the markets in general is how well Janet Yellen can control the real economy around what Trump thinks he can just materialise. Rates are going up, and while citizens chase the American dream by buying even more expensive houses at higher inflated rates, there is plenty of scope for another correction. The subprime mortgage is not the key here, its subprime car loans and student debt that will now be to blame. Either way, by letting people borrow more and more after a crash for extended periods can only end in one outcome Trump has to be the man that that can not only keep America believing it is great again. He has to prove he can create sustainable growth, which despite the jobs numbers real wage growth and the ability for the average American to live within their means is still severely being tested.

Steve Ruffley,  Chief Marketing Strategist at InterTrader

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