Trumping around
Someone suggested recently that I had not yet commented on the latest spoutings of the orange half-wit whom the Americans have installed as their President. It is true that although I share the view of most serious commentators that his actions, as opposed to what he posts in the small hours on Truth Social or improvises on Fox News, are a potential threat to our well being, not just as investors, I do limit my comments in blogs to what are realistically likely economic impacts that are furthermore going to change the future direction of stock market valuations.
To be honest, those who choose to react to Trump’s latest, usually overnight, ramblings have to post blogs or videos daily or even more often. Investment planning cannot be undertaken on the basis of daily reviews, so apart from the exceptionally hazardous decisions, (see later about wars) my comments are always going to be based on observations about how markets have repositioned or are likely to over the medium to long term.
For example, his offer to give all American citizens a relatively insulting sum (one ninth of his Christmas present to his personal staff) to vote Republican (I have cut out the flim flam waffle that tries to explain it is not a bribe) has not been taken seriously by markets. Serious commentators are much more interested in Scott Bessent’s chest puffing and the implied suggestion that markets are welcome to take him on. If they do, he will go the way of Kwasi Kwarteng.
As Mark Malek of Wall Street Truthbombs (see reference below) promptly explained, if the US State was indebted by a further trillion dollars or so to fund Trump’s votes for cash offer, the negative impact on the prospects for interest rates, inflation and so on would likely result in costs that exceed the value of the handout for the average citizen with a mortgage, car finance and a wallet of credit cards.
As a general rule, political shenanigans even on a global scale, are not a factor that will influence stock market direction. Politicians are in the main transitory and in the West, we can assume markets will run on indefinitely.
Of course, the impact of applied political decisions (many political spoutings never actually turn into reality, as we know) can have dramatic effects, like the Bolshevic Revolution at the extreme, or the ending of concensus politics in favour of neo-liberalism (particularly in the USA) which I would place as happening in the early 1980s. Even the latter only had impact that emerged over the longer term, but, for example, there can be no doubt that the ‘Big Bang’ kicked off an era where investors like you and me could more easily participate in markets.
The by-products of political decisons are sometimes dramatic nonetheless, most notably when the decision is to go to war. When Netanyahu persuaded Trump to attack Iran, the former likely knew the economic impacts that would follow as did Trump’s more intelligent advisers.
Unfortunately, the President and his cabal of no-hopers that make up the cabinet in the USA either did not see the impact, or minimised it because they wanted the invasion for political reasons. Bond markets have now priced in the consequences and it is more than likely that equity markets will follow soon – as outlined in more detail in my longer piece at the start of this month.
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