Up to now, the Trump rally has been playing to script. Stocks have soared, yields have spiked and the dollar hasn’t looked this strong since the day of Ronald Reagan. And that’s not a surprise: Markets have a lot of hope invested in the Trump agenda. Lower capital gains taxes, less onerous regulation and — most importantly — a tax holiday to repatriate more than one trillion dollars of corporate cash sitting offshore.
Some investors are concerned that Mr. Trump’s trade policies will depress growth. But others dismiss his protectionist talk as nothing more than campaign posturing. They counter with the idea that Mr. Trump’s fiscal policies will spur domestic demand, which still accounts for 90% of the U.S. economy.
On balance, I agree with the optimists and believe that 2017 should be a strong year of profit opportunities for both equity and currency traders. But I am plagued by doubt: Not about Mr. Trump’s fiscal plans, but about his ability to carry out his promises.
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| The Mexican peso played a key role in a USD/MXN currency play that bet on Trump winning the White House. |
On the face of it, President-elect Trump has been dealt one of the best hands in politics. He comes into office with a majority in both chambers of Congress and with the ability to use his political capital to advocate proposals with little opposition. Yet the last few days have been anything but a study in confidence – perhaps growing pains of a young, outsider team.
The single most important aspect of the presidency is a projection of competence. Ronald Reagan understood that better than anyone else. After all, the basic premise of modern capitalist economics is nothing more than a model of self-fulfilling prophecies: Consumers feel confident about the future … they borrow and spend money … the economy grows.
On the night of the election, like almost every pundit who was fooled by the polls, I was convinced that Mrs. Clinton would win. My arrogance was made worse by my faith in a brand new data project called VoterCast that tried to mimic exit polls of years past. They made woefully bad projections showing Mrs. Clinton winning Iowa, Florida and North Carolina as late as 8 p.m. Eastern Time.
| “On the night of the election, like almost every pundit who was fooled by the polls, I was convinced that Mrs. Clinton would win.” |
But by the time it was clear the real results were not aligning with the expert projections — and as a survivor of the Brexit vote — I knew that the candidate who was ahead early on usually went on to win.
So, while I was still convinced a Clinton win might be in the cards, I decided to buy the USD/MXN cross – a pure proxy for the Trump win in the currency market — “just in case.” That turned out to be the best trade of the night as the pair rallied for 20,000 pips before I finally sold it.
I am starting to get the same feeling about the Trump administration. I still believe that President-elect Trump could spur the U.S. economy to its best growth in years, but I think it’s wise for investors to buy some protection “just in case.”
Happy Trading,
Boris Schlossberg
{ 13 comments }
Hi Boris
I’m happy you are doing so well. As a deplorable I would argue that things are not all that they seem. If HRC had won we would be faced with the certainty of increased out of control debt and open borders encouraging anyone to enter illegally. Each presidency presents its challenges and BHO faced Lehman Bros. where the true impact has been kicked down the road. The headwinds DJT faces are a fed which has run out of ammunition, historically low interest rates, historically high debt and a country that out of desperation has chosen the lesser of two evils. My bets will be slightly different than yours.
For a start, don’t trust or depend on the major print media for the real in-depth news. That way you invest at your peril.
You should not watch the news to get your information (“a study in confidence”) about Trump’s performance and draw conclusions. it did not work before the vote, so why should it work now.
Dear Boris:
I can’t believe you think the Trump Economic proposals will produce positive results for the American economy, and help the middle class and small business owners.
Cutting taxes, where most of the benefits end up in the hands of the super rich, didn’t work until the final two years of the Reagan administration and certainly didn’t work for the Bush/Cheney administration. Remember the term, “Voodoo Economics?” Under Reagan the National Debt doubled. And instead of paying off the National Debt, as Bush promised in his first State of the Union address, it doubled from $ 5 Trillion to $10 Trillion and ended with a near fatal financial collapse in 2008-2009.
We now have a $20 Trillion Dollar National Debt and as interest rates start to increase, the interest on the National Debt will start to equal the spending on National Defense.
Repeating something over and over again that has not worked in the past is the definition of insanity,
Trump will be required to play his “Trump” to all of America’s constituencies if he hopes to succeed. America is more divided than it was in Reagan’s day but after eight years of going without under Obama a return to prosperity will satisfy even the most difficult sectors of the economy as they will see their bread being buttered as well. Mr. Trump will learn very quickly that America is a nation of all the economic strata and the strata that is not served or considered important will rise up against him just as it did against Bush Sr.
not just you, boris, everyone thought hillary would win, even trump. (with the exception of edelson, of course.) lest we not forget, we still have a dovish fed. when the fed becomes hawkish, i’ll become a bear.
Very wise . Sound advise because he is out of his depth an his ego will not allow to change. But we will see.
This market looks like the one when Reagan took over from Carter.
I will hope next year wold be beter las year.
Yep, just in case. It’s a little bit too good to be true.
Don’t know who or what to believe any more. We can read and see just about anything now days. I am very careful who I believe and Weiss is the best in my opinion. We as a people will see in the years ahead weather we made the right choucse . Our world is changing and the powers to be also.
If anyone thinks any president can save the u s economy they are dreaming , the u s is 20 trillion in unpayable debt with over 100 trillion in promises to vets seniors the poor Medicare and medicade ,the only way out is for the u s to default on its debt ,not if but when
Eliminate corp taxes. this will induce job creation. It will also make new taxpayers. Quit forcing people to pay for other peoples freebies. Why cant people see these simple things?