Skip Navigation

Trump’s Congress speech – long on aspiration, short on detail

Investors eagerly awaited President Trump’s speech to Congress last night for any detail on his tax, trade and healthcare reform plans in particular. Unfortunately there was nothing for them to chew on with the speech largely just reiterating Trump’s broad vision on all these issues. A link to the full transcript of the speech is available below.
Over the past few weeks investors have been patient with the new President, willing to give him the benefit of the doubt on his policies until we see the specifics behind the headlines. This is even clear from this morning’s market movements with global equity markets moving higher at the time of writing.
From a policy perspective, what is becoming more evident is that efforts to repeal and replace Obamacare have probably jumped ahead of the queue in the list of priorities. Although investors should expect to hear more about tax reform over the next few weeks, it may take more time than previously anticipated to get tax changes ‘across the line’.  Therefore, Trump’s proposed tax adjustments look less likely to impact on the economy this year. And more broadly, the sooner investors get firm details on Trump’s policies, the sooner we’ll get a clear picture on how they will impact the US and international economies.
In the meantime, global economic data have been very strong over the past few months with G10 economic ‘beats’ at a five year high. This is a sharp contrast with this time last year where deteriorating data gave rise (again) to recession concerns, a key factor behind the equity market slump in January 2016.
This stronger data, along with a decent earnings season in the US (by February 17 69% of S&P 500 companies had beaten Q4 earnings expectations compared to a long run average of 64%) has, in our view, been a vital ingredient behind the stock market progress in early 2017. This should also give investors some encouragement that the foundations for equities’ progress so far this year are stronger and broader than the contents of a 140 character tweet!
Tom McCabe, BoI Private Banking Global Investment Strategist – 1 March 2017