As we have previously written an awful lot happened in the second half of 16 and whilst it was shocking, many markets embraced the resultant potential for change by rising strongly; particularly in the US.

Brexit, which becomes official any day now, has so far played out broadly as expected with the UK talking tough and Europe raising quizzical eyebrows as if to say; really, you think that will work? No one can predict the cause and effect of the changes coming, and the UK markets seem to have decided at least for the time being, to pretty much ignore it until something substantive occurs.

The US has been the real story so far, this year.

“The Donald” storming into Washington in a blaze of napalm tweets and ‘shock and awe’ executive orders.

His first action was to try to ban entry to the US for various nationalities – so far, a failure.

He has back-tracked from his promise to impose border taxes (import tariffs) as numerous potential drawbacks have been highlighted.

And as of last Friday, he failed to get Congress to agree to changes to the Affordable Care Act (Obamacare) ostensibly because 32 members of the Republican Party are so right wing (the Freedom Caucus) that anything other than a total repeal was unacceptable to them, even though this would have put around 24 million people back into having no healthcare coverage.

Now this is going to rattle markets, especially the US, because Trump’s administration had promised things the markets were very keen on:

  1. Corporate tax reform with much lower rates
  2. Rolling back regulations
  3. Gutting Dodd-Frank, the regulations put in place post ’09 to restrict banking activities

Markets are ambivalent about Healthcare reform in general, so the Bill’s failure is not upsetting them from that perspective.

However, it now raises the question, can he get the changes done the market really wants if he can’t get healthcare through?

The fear of what’s now happening in essence is the ages old conundrum of a democratic political system with hugely diverse beliefs and vested interests, which acts to slowly strangle the life out of administrations pursuing radical agendas for change.

The hope with the tax, infrastructure and deregulation parts of Trump’s agenda however, are that they will be less contentious to the Republican Party which if united, has a majority in each house.

There is no doubt this is the part Trump cares about most; healthcare mattered far more to the Republican Party so he said what needed to be said.

The more radical wing especially abhorred Obamacare as a poisonous Socialist overstep into a European style Liberal big Government, which had to be rejected, hence their unwillingness to any compromise that kept it in place even if it was weakened.

So, the next chapter in the US odyssey is to see if the administration can regroup and create economic change.

A lot of the Trump hype premium is leaking out of markets now, so if real change does happen there’s upside from here.

The other important aspect of markets and prices relates (some would say it’s actually the only thing that matters) to company specific growth in turnover and profits.

The world economy is improving, activity is growing and this will support asset values independent of whether ‘The Donald’ can walk at least some of his talk.

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.