Analyzing Trump effects
Analyzing the Trump effects requires a good analytic framework and a non-political approach. I hope these concepts will be familiar to regular readers. I was delighted to read a great piece from Prof. Aswath Damodaran, covering both themes. He produces this excellent diagram:
The stimulus/infrastructure theme is getting a lot of attention. PBS had a pretty objective analysis of the needs, labor shortages, and implementation problems.
My conclusion is that something major on infrastructure needs will be approved. Here are three key reasons:
- Congress loves to spend money and point to the effects in specific districts.
- It is easy to imagine a bipartisan coalition. This week showed support from the GOP side via Barron’s and the Dem side via Barry Ritholtz. The philosophies are in alignment.
- It is the right thing to do. There are important needs. The exact term of new bonds is up for debate, but locking in low rates seems pretty obvious.
Time Frames encourage a wide range of conclusions. Many are predicting that Trump policies will all end badly – eventually.
Moody’s Mark Zandi has downgraded economic forecasts.
The firm’s “outlook for the U.S. and global economies has been shaken up by the shocking election of Donald Trump as president of the United States,” writes Zandi in the firm’s latest monthly economic outlook. “Based on our analysis to date, the economy under President Trump will likely perform a bit better in the near term but ultimately it will be diminished.”
Zandi is projecting that GDP growth under four years of President Trump will be less than 2% per year, below the 2.2% he had been forecasting before the election. “That is not a big difference in any given year, but it is meaningful over a four-year period,” writes Zandi.
Digestion. There is plenty to do. Here are the key issue areas in my planning for the Trump administration. Each requires study of political dynamics as well as overall impact. Most of the punditry is still reaching far beyond what they know, writing on deadline, driving too fast for the reach of their headlights.
I am starting with the most general and important themes. I welcome suggestions about interesting topics or themes I have omitted. In each case I am evaluating probabilities, impacts, and stocks affected.
-
Stimulus
- Infrastructure
- Tax cuts
- Financing
-
Sectors
- Health stocks – biotechs, pharma, insurance, hospitals — all different
- Energy
- Construction
-
Trade policy
- Exporters
- Importers – corporate and consumers
- Immigration
- Law and Order
- Defense
