Yahoo Finance Here's what financial markets need to hear from Trump on Friday
On Friday, Donald Trump will be sworn in as President of the United States.
And while inaugural addresses are often forgotten after just a few hours, Trump’s words on Friday will be closely tracked by financial markets that have seemingly pinned a number of hopes on the President-elect’s agenda already.
In a note to clients on Tuesday, Greg Valliere, chief global strategist at Horizon Investments, outlined some of the key things investors will be looking for, or even pining for, on Friday. Particularly as the post-election “Trump Rally” has leveled out considerably in the last month or so.
Valliere notes that markets are able to brush off Trump’s tumultuous public spats — whether they be longtime House Rep. John Lewis, the US intelligence community, or Western Europe.
But when it comes to the US economy, “investors absolutely, positively need to hear Trump embrace a pro-growth agenda [on Friday],” Valliere writes.
“What the markets need to hear from Trump is a full-throated defense of tax reform,” Valliere writes. “But even on a layup like this, Trump muddied the message this weekend. He seemingly rejected the idea of ‘border adjustability,’ which many House Republicans support because it would reward exporters and punish importers.”
As we noted earlier this week, Trump bemoaned that a border adjustment tax was “too complicated” in an interview with The Wall Street Journal.
The border adjustment is a key part of the House Republican tax plan as a way to benefit US-based manufacturers who either sell goods in the States or export them, while punishing imports. The concerns on this front are many, including worries that this proposal could possibly run afoul of the US’ obligations under the WTO.
But Trump’s suggestion that this plan is altogether “too complicated” could set the table for the White House to pursue perhaps a simpler, but more punitive, tariff on imports.
“Eliminating border adjustability would deprive the tax-writers of about $1 trillion in new revenues over ten years, and that would doom the already-tricky attempt to make the bill revenue-neutral,” Valliere writes.
“If this prompts GOP deficit hawks to scale back the size of the Trump tax cut, that would widen deep fault lines between the new president and Congressional Republicans.”
Valliere also notes that markets have given up on any sort of free trade agenda getting play in the Trump administration, while the difference between Senate Republicans and Trump are starting to widen on how to repeal and replace Obamacare.
Earlier this month, we wrote that the “clock is ticking” on Trump’s economic promises. And while Trump hadn’t then and hasn’t now formally taken office, most all of the stock market rally and commensurate rise in optimism among businesses and consumers after the election was based on hope.
Hope that Trump’s agenda would sail through Congress and lift the cloud of uncertainty that had been hanging over the US economy, and hope that the political tit-for-tat that has so exhausted US voters, consumers, and businesses over the last eight years would no longer feature. On Friday, the process to turn hope into action begins in earnest, and the expectations from markets are high.
—
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
Read more from Myles:
