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Trump gets stocks thumbs up and Buffett agrees

Every time I think of the Trump victory I’m grabbed by that old movie title that asked: “What just happened?”

 This was a satirical comedy and there are those out there who thought the only way Donald Trump would’ve been President of the USA would’ve been in a satire!

In fact, The Simpsons in the past — many years ago — looked at Lisa Simpson as an adult in the future, who had just been named President and she lamented how she had to deal with the former administration’s huge deficit left behind by President Trump!

But this is not a TV satire, this is reality. However, like in a satire, the stock market hated Trump before the election and showed, using money, that it did not want him. But post-poll it’s all forgiven and all the way with Donald J. This definitely sounds like a satire.

Like the market, I wanted a Hillary win, not because she looked like the best candidate, (though on a human being basis I suspect she is) but because the market was afraid of the wild promises of Trump. He sounded worrying and filled with uncertainty and the market prefers certainty.

So when the FBI trumped Hillary over her email stupidity, Trump went up in the polls and the market went down.

Pre-election when it was thought Hillary would win, the stock market went up and when we saw this was wrong on Wednesday our time, our S&P/ASX Index lost 4%. Then it settled on about a 2% loss ahead of Wall Street’s reaction. It too was negative — they hated Trump, remember — but then his victory speech started to turn sentiment and analysts started looking at his promised economic policies and revisionism crept in. And we were off to the races with Donald.

Being a TV star, I wrote a piece for Switzer Daily entitled: What just happened? Donald is taking us to La La Land! Yahoo!  [1]

 And I was right, with the Dow Jones up over 5% since the Trump surprise and we’re up 4.1% and for the week we were up 3.6%, so Donald is no longer seen as a threat to the global economy, US stocks and, undoubtedly, our stock market.

The pre-poll thinking was if Trump won, the market would be down 10% at worst, which would rattle confidence and put the Fed on hold with the expected and needed rate rise in December. This too is a confidence thing and another retreat by the Fed, which we’ve seen for nearly two years, would have made the doubters and doomsday merchants feel vindicated and confirm the good sense of buying safe government bonds at ridiculous interest rates or yields.

But the new take on Trump has changed all of that and so the consensus is that he will spend on infrastructure, cut taxes, pump up economic growth, help inflation and that means interest rates will rise.

I like the scenario as it makes my favourable view on stocks and the economy seem even more likely. Trump could prove to be the confidence circuit-breaker that has been desperately needed since the GFC saw governments hand over policy to central bankers.

These people are primarily inflation-fighters and all of a sudden they’ve been asked to find their old hat as “growth- and job-creators”, but as a one trick pony, their cutting interest rate play has been found wanting.

The US has a new pony, who’s more like a stallion and he could take us all to the races. I’m not alone on this and so let me list the new takes on Trump that add to the more optimistic view:

So what are the worries from here?

The price of oil will be keenly watched and what OPEC and their oil producing mates get up to will be a big watch. The US dollar and what it can do to commodity prices, but the growing global demand story will be working against that worry. And of course, Donald Trump, the team he selects and what he says will always be a risk but you can only hope that he plays the winning game that explains why he becomes the 45th President of the USA on January 20, 2017. What is interesting is that without Donald Trump we would have had more of the same — a slow, grinding higher economic and market outcome. He should shake up things and produce better growth and higher stock markets but he also could bring closer the next recession and market crash.

I can’t see it in 2017 but some time in 2018 I will be looking for omens.

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