AFTER what we've seen and heard in the last week we might be asking ourselves: How did the US let this happen? How did their so-called developed society allow this situation to occur?
Facebook memes and reality TV shows have perhaps not been as successful in raising IQs as perhaps they were intended. It is a truly shocking situation.
Roosevelt said presidents are selected not elected. I find it difficult to counter that argument, and, just as the malleable and naïve Woodrow Wilson was plucked out of Princeton and moulded into power to sign through the quasi-private governing body of the US monetary system, the federal reserve, we screen every action of Trump to look ahead where this is actually going.
One might only look at who he has appointed to his cabinet to see the destination and perhaps why an already inflated stock market is inflating further. It’s the richest cabinet ever.
It was a long time ago I gave up on the fact that markets were efficient and made sense. If they did, they would not be where they are now, and sense would be made of why central banks have continuously, purposefully, pumped money into the markets for so long.
You either believe the world is changing or you don’t. The world changes and this looks like a big change.
Trump's bungling words in his pre-runs were embarrassing, but his speech was orchestrated, rehearsed and meaningful. Whether his actions follow the words, will be the key determining factors on the value of your pension and investment funds, or perhaps he just uses some ‘alternative facts’ to defend his actions, despite how demonstrably false they are.
His words are all about infrastructure and investing into companies and using these to create jobs and indeed keep the wealth with the people, rather than the 1 per cent at the top. You’ll find in next week’s column that is indeed nonsense.
He’s ‘gunna’ cut taxes for middle classes and for companies from 35 per cent (he mumbled - ‘its more like 38 per cent’) to 20 per cent. Trump adds “the bigger thing, and that surprised me, is we’re gunna cut regulation ”…his policies surprise him! He adds he is cutting red tape by as much as 75 per cent - “or more”. As he patted a Dell member of staff saying (about cutting red tape): “you're gunna have your approvals fast”. You couldn’t help but think the school teacher had given the prefect job to the least suited guy in the school.
If he maintains this protectionist policy, along with infrastructure plans, this will be inflationary. Rates will have to rise and with that will the dollar, which flies in the face of Trump’s plans for the currency.
His chairman of the House ways and means committee, has put together considerable tax changes, which will affect the competitiveness of European countries, and particularly Ireland as a tax haven for corporations.
His tax incentives to bring corporations back, miss the simple point of the heightened cost of production (manpower costs) so costs will rise for the consumer and so will inflation, leading to more rate rises and so consumers will be caught between the rock of mortgage costs and the hard stone of inflation – they will have less money.
In the short term the other drastic tax changes affecting imports and assisting exports will hurt oil refiners, US retailers like Walmart, Home Depot and other importers, but will benefit the exporters and manufacturers such as GE and Boeing. The Institute for Supply Management index rose 1.3 points to 56 a point higher than economists expected and the highest since November 2014.
With Brexit on course, expect sterling to tank more, so in the short term, you will have the grounds for an increasing FTSE100 due to the dollar rising and a falling sterling. With 75 per cent of earnings from the FTSE100 coming from overseas the repatriation into sterling is a massive cash boost for earnings.
Their shares will also be valued in sterling so external investors will see each and every sterling fall as an opportunity to snap up the company thereby driving prices higher still. More on Trump next week.
:: Darren McKeever (dmckeever@wwfp.net) is Northern Ireland adviser of Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. For a free, no obligation initial chat about your individual finances, call 028 6863 2692, email info@wwfp.net or click on www.wwfp.net. Follow us on Twitter: @WorldwideFP.
