the sector next year , potentially encouraging merger and acquisition activity .
DEREGULATION Another area with the potential to significantly affect the stock market is the deregulation of the financial industry . Banks have outperformed since Trump ’ s victory on this promise and his choice of two former Goldman Sachs executives as part of his economics team should give Wall Street a strong voice in government .
That said , Stubbs believes that deregulation is more likely to benefit smaller community banks , which are disproportionately affected by restrictions designed for larger organisations . However , they are less well represented within the stock market , so any slackening of the rules may not be seen as clearly in the performance of the major indices .
There is nothing else on Trump ’ s list that is likely to have such a direct impact on markets . Stubbs says : “ The measures may boost growth , which may boost inflation , which may knock the bond market . But you are pitting assumption on assumption . We have already seen a reality check in the bond market . There is uncertainty every step of the way .”
John Pattullo , co-head of strategic fixed income at Henderson , agrees : “ I am not convinced the whole world will grow faster under Trump . More likely , it will grow less fast , but heavily skewed towards the US and away from both Europe and Asia . We have written substantially about peak everything – for example demographics and trade , as well as de-globalisation , digitalisation and the lack of productivity — so there was never that much growth to be shared around . The markets are of course discounting the future , but some of the moves seem quite heroic to an old sceptic like me .”
“ The new president wants to ensure other countries are aware of how far he is willing to go ”
FISCALLY PRUDENT Specifically , proposals such as a significant cut to income tax may not make it into law . Jane believes investors would be wrong to underestimate Trump ’ s negotiating skills , but for his income tax proposals he must contend with a fiscally prudent Congress , which may be unwilling to allow him a budget-busting spending plan with bond yields edging higher .
Infrastructure-related companies have also benefited from the Trump effect to-date in expectation of greater spending . Certainly , US infrastructure is weak and this is acting as a barrier to growth in the US economy . As a businessman , therefore , Trump is likely to look at how to improve this area , but there is also scepticism about how much he can achieve . Stubbs is reserving judgment on whether the promised private sector tax credit will really have any impact on the building sector .
Another key area of concern is Trump ’ s trade policies . Jane believes that many of his campaign pledges were simply strong-arm tactics rather than genuine proposals . The new president wants to ensure that other countries are aware of how far he is willing to go ; again , it appears to be a negotiating tactic rather than a serious pledge .
Stubbs believes that some of his wilder ideas would be almost impossible to implement in
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