As Donald Trump stands poised to take control of the White House, Emma Cusworth considers how his presidential tenure might affect institutional investment.
“Investors would do best to ignore the noise, ignore the volatility, take a 10-year view then switch off their screens. And keep watching The Simpsons.”
Saker Nusseibeh, Hermes Investment Management
Back in 2000, the writers of the satirical US programme The Simpsons predicted not just Donald Trump’s election as president, but also what would follow. Lisa Simpson, who succeeds Trump to the Oval Office during the ‘Bart to the Future’ episode says: “As you know, we’ve inherited quite a budget crunch from President Trump.” Secretary Milhouse Van Houten responds: “We’re broke.”
With Trump’s penchant for leverage and election campaign rhetoric suggesting his presidency would see a significant change in fiscal policy, some experts suggest Milhouse’s predictive powers may not have been too far from the mark. And even though four, or even eight, years may seem like a short period, Trump’s approach to government debt, foreign policy and climate change, coupled with his unpredictable personality, could turn out to have long-lasting consequences for investors.
Early evidence of key White House appointments suggests Donald Trump is likely to take a fairly hard-line approach to delivering on some of his key election promises.
He is also likely to be able to achieve a considerable change in US fiscal policy to fulfil his plans to cut corporate and personal tax rates, and increase spending on defence and infrastructure. Financial market regulation in the form of Dodd-Frank is expected to be largely rolled back and, although he will not repeal Obama Care entirely, he is likely to make significant changes to the Affordable Healthcare Act. The latter could prove highly damaging for the nation’s fiscal strength.
