100 Days of President Trump: A Market Analysis

The 100-day milestone of the United States President is often maligned as too short, poorly representative, and misleading as to the effectiveness of that President’s leadership. Originating in the days of Franklin D. Roosevelt’s New Deal, the landmark has little significance in today’s USA, thanks to a commonly divided Congress and outspoken parties on either side of every major issue. 100 days can now only be used as a landmark to evaluate the direction in which the President is leading the country, as opposed to what he (or perhaps, someday, she) has ultimately accomplished in that short time span.

So in what direction has President Donald Trump led the USA? One of the key features of his campaign platform was his confidence that he could bolster the United States economy, and that his election would help profits in sectors like raw materials, financial services, and pharmaceuticals, and that he would be able to negotiate deals that bolster American industry. These claims were backed by expectations that Trump would swiftly cut taxes, lower regulatory spending, and introduce expansionary fiscal policies to build on top of the already significant infrastructure spending of his predecessor. The reality has been somewhat different. Promises of a “great wall” on the southern border of the United States have been rephrased to reflect the immense costs of such an undertaking. The “Donald Trump tax plan” is little more than a laundry list of what he hopes to see in the next tax arrangement, including a removal of the estate tax, a reduction of corporate tax, and a streamlining of income taxation. A promise to “pull out” of the proposed Trans-Pacific Partnership (TPP) was fulfilled, but a similar vow to exit the North American Free Trade Agreement (NAFTA) has been replaced with a 20% Tariff on Canadian softwood-lumber, and a feud over the accessibility of the Canadian dairy industry.

In spite of all of these setbacks on Trump’s plan of action, market and economic indicators reflect a less pessimistic outlook. The S&P 500 Index, comprising largely American firms, is up over 5% above its level at Trump’s inauguration. Furthermore, the iShares index of the US Healthcare sector is up 2% over the inauguration, which trails the market, but firmly beats the expected performance under a Hillary Clinton administration. However, the value-weighted index of U.S. financial services firms is down more than 2% since that same date, thanks to weak performance of key commercial banking services like mortgages and small business loans, even while mergers and acquisitions performance has been robust. Moreover, US GDP growth slowed to just .7%, its weakest pace in three years. This all conspires to send mixed messages regarding President Trump’s performance since inauguration.

However, though key market and economic indicators reveal a mixed outlook for the United States, participants retain their optimism going forward. The Federal Reserve has stated that its economic slowdown is likely “transitory,” and Fed Funds Futures reflect a 94% chance of rate hikes at the June Fed meeting. The implied meaning here is that not only is the Federal Reserve Board expecting a resurgence in economic growth, but that market participants are similarly confident.

Ultimately, the financial markets and economic indicators reveal mixed sentiments about President Trump’s direction for the United States, likely owing to the failure of such key policy plans as the Muslim immigration ban and the Mexico border wall. However, economic outlook appears to be optimistic, and both public and private market participants agree that current setbacks in the American economy are only temporary.

By,

Gordon Milne

Works Cited

 

Fleming, S. (2017, May 3). Fed Sees Economic Slowdown as Temporary. Retrieved from Financial Times Web site: https://www.ft.com/content/2cc51074-2c10-11e7-9ec8-168383da43b7

Fleming, S., & Samson, A. (2017, April 28). US Suffers Weakest First-Quarter Growth in 3 Years. Retrieved from Financial Times Web site: https://www.ft.com/content/2cc51074-2c10-11e7-9ec8-168383da43b7

McLannahan, B. (2017, April 13). JPMorgan Tops Forecasts on Record Investment Bank Revenues. Retrieved from Financial Times Web site: https://www.ft.com/content/a2891060-2041-11e7-a454-ab04428977f9

The Wall Street Journal. (2017, May 1). President Donald Trump: The First 100 Days. Retrieved from The Wall Street Journal Web Site: http://www.wsj.com/livecoverage/donald-trumps-first-100-days

Yahoo Finance. (2017, May 3). iShares US Financials. Retrieved from Yahoo Finance Web site: https://finance.yahoo.com/chart/IYF#eyJtdWx0aUNvbG9yTGluZSI6ZmFsc2UsImJvbGxpbmdlclVwcGVyQ29sb3IiOiIjZTIwMDgxIiwiYm9sbGluZ2VyTG93ZXJDb2xvciI6IiM5NTUyZmYiLCJtZmlMaW5lQ29sb3IiOiIjNDVlM2ZmIiwibWFjZERpdmVyZ2VuY2VDb2xvciI6IiNmZjdiMTIiLCJtYWNkTWFjZENvbG9yIjoiIzc

Yahoo Finance. (2017, May 3). SPDR S&P 500 ETF. Retrieved from Yahoo Finance Web site: https://finance.yahoo.com/quote/SPY?p=SPY

Picture titled, "Donald Trump," taken by Gage Skidmore on March 15, 2013, obtained through Creative Commons (https://flic.kr/p/e47jAC