US presidential hopeful Donald Trump has said a lot of crazy things. Astonishingly, he may even mean some of them.
All his talk about building 2,000 mile long walls, deporting illegal immigrants (all 11 million of them) and banning Muslims from entering the US may have destroyed some people’s faith in America, but could he also destroy your investment portfolio?
We Will Survive
I don’t give any credence to overheated talk about President Trump destroying the world if he wins in November.
Instead of destroying faith in the American political system he may, paradoxically, revive it, as the checks and balances swing into place and stop him from doing the six impossible things he dreams up before breakfast. Congress isn’t just going to roll over, especially since so many of his impossible ideas clash with Republican policy.
I expect to see a more mollifying candidate Trump in the run-up to election day, as ‘the Donald’ tries to look Presidential. But I do still have some concerns.
Trump is popular because the US middle-classes are hurting, and they readily believe his claims that destructive free-trade deals and unfair competition from China are the reason. For some reason, they appear to believe that a billionaire real estate developer is the guy to stand up for the common man. Even if they don’t believe that, they don’t see anyone else trying.
Jaw-Jaw, Not Trade War
If Trump wins in November it could herald a new era of protectionism, which wouldn’t do the global economy or stock markets any favours at all. He has talked of imposing import tariffs of as high as 35% and banning American companies like Ford from building plants in Mexico, which would surely trigger tit-for-tat retaliation from trading partners around the world. His anti-immigration platform could also hurt US growth by stemming the flow of legal as well as illegal immigrants, and that might indirectly hurt our economy too.
Trump says his goal is a pro-business policy that rewards companies that “invest in America, return to America, or stay and thrive in America”. This is a concern for an open economy like the UK’s, but as an investor you cannot afford to get too worried about it.
First, of course, Trump is not yet President. A lot could happen over the next few months. Also, populists are notoriously bad at governing. Many of the things he says he will do sound ridiculous and dangerous precisely because they are not actually do-able in practice.
Trump likes to trumpet himself as a dealmaker. His recent comments suggest that even he understands his limitations, and will quickly start cutting deals. The people who have most to fear from Donald Trump are supporters who have been promised the world, as they may be disappointed with what they actually get.
A protectionist President Trump could spring some nasty shocks, but perhaps the biggest surprise to his supporters will be how little he can actually do in practice. All his sound and fury may ultimately signify nothing. The US will survive, and so will your portfolio.
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