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Is Donald Trump good for your wallet?

2 February 2017 in Trading Ideas

Ranging from tax cuts to regulatory rollbacks, healthcare reform to immigration overhauls, the Trump administration stands to bring about an array of changes that could have major implications for investors. But where should you look to for signs of progress and when?

President Trump hit the ground running following his January 20 inauguration, signing a series of executive orders during his first days in office that will have an affect on American businesses and the economy. He ordered the U.S.’s formal withdrawal from the Trans-Pacific Partnership, instated a freeze on all in-process regulations and moved to expedite environmental reviews for high-priority infrastructure projects.

The president also huddled with business executives and Congressional leaders to identify steps forward. He met with manufacturing and automotive CEOs at the White House during his first two full weekdays in office, and he traveled to Philadelphia to address Congressional Republicans at a retreat there.

Still, there’s much more to come.

Tax reform, arguably the most relevant item on the agenda for investors, is expected to advance slowly but surely. But before any legislation is signed, there are a few areas where Trump and House Speaker Paul Ryan will need to find some common ground.

Trump’s campaign-trail proposal and Ryan’s A Better Way plan, in broad strokes, are similar: they cut taxes drastically for individuals and corporations and generally benefit the wealthiest Americans most.

The president’s plan, however, hones in on a 15% tax rate, while Congressional Republicans’ plan lands at 20%.

White House Press Secretary Sean Spicer addressed the discrepancy at a news briefing on Monday, telling reporters the president is a “very successful businessman and negotiator” and will work with Congress on the rate.

Trump’s plan would also result in a tax hike for some in the middle class because it eliminates personal exemptions and head-of-household filing status — an issue the Ryan-led GOP plan largely avoids.

And there’s the question of border adjustability (which taxes imports and excludes exports from taxes). House Republicans favor it, Trump doesn’t.

Look to these issues to be addressed and resolved before meaningful progress is made on legislation.

The good news for investors is that when legislation is passed doesn’t necessarily matter, as long as it’s this year. There is a good chance that lower rates would apply retroactively to the beginning of 2017.

Progress on regulatory rollbacks will be tougher to track, given the wide scope of what it could entail. Trump told business leaders on Monday that he wants to cut regulations by 75% or “maybe more.”

Investors will want to keep an eye on Trump cabinet picks like Scott Pruitt, who he’s tapped to lead the Environmental Protection Agency, Wilbur Ross, his nominee for Commerce Secretary, and Steve Mnuchin, his selection for Treasury Secretary.

Carl Icahn, the 80-year-old billionaire investor Trump has brought onboard as a special adviser on regulation, will be a good barometer as well. Icahn is a relatively frequent guest on CNBC, often blogs and even takes to Twitter.

When something he thinks is good for making money happens in the Trump administration — whether a rollback in energy regulations or the watering down of Dodd-Frank — there’s a good chance he’ll say it.

Many of the initiatives Trump and Congressional Republicans hope to achieve have no set timeline, but there are a handful of key dates to keep in mind.

March 16 is the debt limit deadline, and Washington, D.C. will have to decide what to do about it. It is highly likely lawmakers will strike a deal to raise the debt ceiling before then, so investors need not lose too much sleep over it.

The current Continuing Resolution — the legislative budget that funds the government — expires on April 28. If Congress doesn’t pass a budget or another resolution, there will be a shutdown. But again, “The Art of the Deal” author president is likely to help strike an agreement.

Trump’s 100th day in office will be April 29. And while the first 100 days mantra is largely an arbitrary marker, it still sets the tone for what’s to come. Before investors “sell in May and go away,” they’ll want to survey whether the new administration and 115th Congress is advancing in the way they had hoped.

Economic data — jobs, GDP, consumer spending — will be increasingly telling about the Trump administration’s successes or failures as time wears on and policies and maneuvers take effect.

And, of course, there’s earnings season. Corporate America’s results from the first three months of the year will be early indicators of the winners and losers under Trump on Wall Street.

The good news for investors: Trump wants to be successful by all measures, including the markets. The bad news: his primary concern isn’t lining investors’ pockets (no matter how many ex-Goldman Sachs execs surround him).

When asked by the Washington Post’s Bob Costa whether he gives any thought to how even a mere tweet can rock stocks, he waved off concerns over market volatility.

“Stock drops and America goes up,” he said. “I don’t care.”

 

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