Keep Calm – Carry On

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This feels a bit like Groundhog Day, doesn’t it?

We go to bed thinking one result is pretty much a done deal and wake up to the shocking reality that the opposite has happened.

So, Donald Trump is President and even writing that makes me want to laugh in that half-crazed way of a person losing their grip on any sense of reality.

Keeping calm

In truth though the main issue I personally have with Trump, is that he seems a deeply unpleasant individual: totally unfit in character to follow in the illustrious footsteps of a Lincoln, Roosevelt or Truman.

So I have as much personal animus to him as I had affection towards Obama, but that’s not important to assessing the likely narrative of his future administration.

It cannot be overstated how transformational it is that the Republicans now have a President and hold a majority in both the Senate and Congress. This means they can push through their full-fat agenda unlike the Obama administration which was neutered by a Republican Senate/Congress and that’s where we should now focus our thoughts.

What’s likely to happen

Trump’s acceptance speech today was Presidential, it was inclusive in tone, and spoke of regeneration and a broad coalition to create change.

What this means in practice we think, is the headline, first 100-day big ticket initiative will be TAX REFORM.

The US tax system needs overhaul and the Republicans can, and we think, will now do it big time.

We will likely see a dramatic reduction in Corporation Tax, changes in personal taxes and crucially we think it’s very possible that a repatriation of foreign earnings of US companies will be facilitated at a lower tax rate.

By some estimates that’s over 3 trillion dollars potentially coming back.

This money is untaxed in the US, so let’s say it comes home at a 20% rate.

That’s up to $600 Billion of tax revenue!

Trump talked explicitly in his acceptance speech of infrastructure renewal which the US desperately needs but can’t currently afford; it can with $600 billion of new money!

Such a massive fiscal capital spend will, if undertaken, boost employment, wages, domestic consumption and GDP. For the time it’s running it will create a boom.

So, cut corporate and personal taxes, deregulate business and embark on a massive infrastructure renewal.

From an investment market perspective that’s a wonderful combo.

Conclusion

This election is not Brexit; the UK has chosen an untravelled road with no idea how it plays out. People are worried and they should be, with no idea where it goes; not that it’s a definite disaster but it could be unpleasant for a long time.

But for the US post-election what can happen because all three legislatures are Republican, looks like it could be similar to parts of President Roosevelt’s new deal in the 1930s and the US did pretty well out of that.

Socially this result is deeply unsettling; financially however it could be very rewarding.

Note: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.

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