/ DONALD TRUMP /
SOFT TRUMP / HARD TRUMP ?
Cherry Reynard delves into the detail to find out what a Donald Trump presidency really means for investors
P OLITICIANS ARE IN
THE BUSINESS OF PROMISES , but Donald Trump has promised more than most – from his headline-grabbing Mexican wall , to dropping Bowe Bergdahl out of an airplane and prosecuting Hillary Clinton . High office will impose greater restrictions , however , and many of these pledges will wither on the vine . So which campaign promises will Trump be able to keep , and which will matter most to markets ?
Trump significantly toned down the bombast seen on the campaign trail when he announced his “ first 100 days ” pledge : there was no mention of the Mexican wall and instead he focused on five key areas : the withdrawal from the 12-nation Trans-Pacific Partnership ; the cancellation of environmental restrictions on US companies ; the removal of other red tape , including a new rule that says for every new regulation , two old ones must be eliminated ; and measures to guard against cyber attacks and examine visa programmes . For the time being , there has been no mention of the drastic tax-cuts that got markets so excited .
NEGOTIATING TACTICS David Jane , head of multi-asset investment at Miton , says : “ One way to look at it is that he is a businessman . His campaign was more the start of negotiating tactics , rather than genuine policy pledges . A lot of what Trump said during his campaign was simply bluster to draw attention .”
With this in mind , Jane believes that the tone taken by Trump in his early days in office will be informative : “ It is important to remember that the US is a country of small businesses , many of which voted for Trump . They will be feeling good at the moment .”
For both Jane and David Stubbs , global market strategist at JP Morgan Asset Management , corporation tax remains the most important change . The US still has one of the highest corporation tax rates in the world , encouraging companies to keep cash overseas . Stubbs says : “ The main focus for markets is whether Trump cuts the corporate tax rate as promised . That ’ s what ’ s behind the rally in equities . It ’ s very mechanical . If the earnings rise , it justifies the multiple on current share prices .”
He believes this is also the most likely policy to be implemented , adding : “ In the Republican party , there is a reasonable consensus that this would be a good measure – corporation tax has not been a significant source of revenue . It is unlikely that people will stand in the way .”
LOOPHOLES The impact of any tax cut is likely to be felt more by smaller companies , which do not have recourse to the same tax loopholes as their larger counterparts .
That said , according to a Forbes Magazine survey in April , the 10 largest payers of corporation tax are Apple , Berkshire Hathaway , JPMorgan Chase , Wells Fargo , Gilead Sciences , Verizon Communications , Citigroup , Bank of America , Alphabet ( owner of Google ), and ExxonMobil . These 10 groups paid around $ 60bn between then in the last calendar year , so would also be beneficiaries of the shift .
There is also the secondary consideration of whether Trump ’ s promised corporate tax amnesty for repatriated corporate assets currently held offshore comes to fruition .
“ The details on this are less clear ,” Stubbs added . “ If we get what has been billed , companies will pay 10 per cent on repatriated profits . This would certainly be positive for the corporate sector , though it will be interesting to see what they will do with it . Will they invest it ? Will they hold it ? Buy back shares ?”
In practice , around half of the offshore assets are held by technology companies so it could have an important impact on
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