Trump 2 – a different and personal take on the implications
So far…
At this early stage of the new US President’s term of office, it is not possible to make any reliable predictions about the global macro economic impact beyond examining the potential threats, which I have already done in a number of ways, as have many, many other commentators.
I will this month offer what is absolutely only an opinion, based on my personal view of the world, so this piece is not claimed to be educational. Feel free to disagree with me: I will be satisfied if I have prompted you to think about the situation in a new way or added an angle to your existing assessment.
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I have written with some trepidation about the potential consequences that will result from Trump 2.0. The global macro-economic outcomes of some of the promised policy actions could be dramatic.
Markets seem to have taken an optimistic turn in the last few days. That probably means that participants are betting that there is more bluster than real intent in the bombast that has always characterised Donald Trump’s attempts at global politics.
“I see trouble ahead…”
I am in no way convinced that this optimism is justified but am happy to look at better numbers in my portfolio valuations, of course!
I am not proposing that the most damaging or bizarre of the touted policies will, or will not, be actioned. I don’t really think we will know that for a while, although some actions are promised even for today.
It often takes years for some major political missteps to impact economies and financial markets permanently – Brexit is a great example of that, although I know not everyone agrees with my view that for Britain’s financial markets it was a mistake. Only the most partisan could now argue that there was a boost to the UK’s global status as a financial centre in the years since Brexit. Other consequences are now apparent, although not much publicised.
I personally remain very nervous about the immediate future consequences of the 47th presidency of the USA. I think there are a few likely scenarios, but it is pointless speculating ahead of the inauguration.
Rather better to keep a close eye on the news and market reactions to the news as it emerges, not forgetting to try and work out the longer-term consequences. I will do my best to add interpretation as soon as I have an opinion.
Here is a ‘factoid’ from the investment trade press, commenting on AI applications:
A good example is a recently released AI product called Draft One, developed by Axon in the US. The company, previously known as TASER International after its initial product line, produces equipment used by law enforcement agencies in particular. From Tasers, it diversified into cameras and now offers bodycams, dashcams and software. Draft One is a multimodal AI tool, meaning it can interpret words, audio and video, that can automatically generate a police report from the footage captured by an officer’s bodycam. On returning to their station, Draft One will have already drafted the vast majority of an incident report, maybe even capturing information that would otherwise have been omitted. The officer is then simply required to complete and verify the report. From field trials in the US, the product has delivered an 82% reduction in the time taken to write reports.2
Citywire Infocus
Some years ago, before AI was ‘a word in common parlance’, as lawyers like to say, the famous economics and finance professor, Dr Robert Schiller was explaining how ‘sell side’ stock brokers had learned about algorithms being used by investment researchers to glean data from mass media coverage of companies. In those days, it might have been as simple as the number of times a name was searched on Google, or scanned by Google’s ‘spider’ when collecting the data it used for searches (and we now know, rather more).
The more I read about AI, the more I want to weep.
He explained that those responsible for promoting shares (as I have explained to readers taking my investment training, shares are sold much like health food supplements) would make up superfluous press releases containing words that they expected to be searched for in the research algorithms. By that means, they increased the odds of getting their company reported to the researchers who might make it a buy recommendation. A sort of FOMO stimulus.
This produced some very amusing results on occasions, like when there was a sudden tick up in interest in the shares of Jupter Investment Management, then run by Edward Bonham-Carter. It turned out that his sister Helena was up for an acting award, but the algorithm was only set up to look for the surname, so her media coverage was assumed to represent a surge of interest in Jupiter shares!
Even simple Search Engine Optimisation (SEO), or YouTube video listing work is a form of the same process of trying to find out what feeds an algorithm and then stuffing the inputs to get a given result.
It will not be long, I anticipate with my usual sad but experienced view of humanity, before the police are pointing their body cams at just what they need to get the report written to tell the story the way they want it told. You know, officer out of shot puts the gun in the hand of the dead black guy, raising it in an aggresssive pose, then another officer turns to get a bodycam image? I hope I am wrong.
I receive a daily news feed on markets from the Dealbook team at the New York Times. I find this useful as we all know that what happens in the US stock markets is highly relevant data in interpreting the global macro-economic climate and overall financial risk.
The New York team leader Andrew Ross Sorkin recently published his thoughts on what might happen in 2025. Now pundits there are a plenty, but this author has contacts at the very highest levels of US business, so you might be interested in his thoughts as context. I have picked the points I thought most relevant to UK-based retail investors. My own touch of flavour is added.
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The market trend that I have previously called ‘benign’ was set back by a sharp but short correction in early August and what looks almost like an echo of that in early September. So far we have not had the same this month. In terms of global market indices, the low points of those dips look to be more or less in line with the trend in market lows for the last couple of years as does the current high valuation.
As we know the upward momentum is not evenly strong across the globe with much of it having come until quite recently from the so-called Mag 7 stocks, although in truth not all of the chosen 7 have done that well.
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