The Trump presidency has been an almost incomprehensibly huge disaster so far, both in terms of core American values and the operation of the economy–even before Trump’s worst-in-the-world handling of the pandemic.
Looking solely at narrowly economic factors, real GDP had flatlined, pre-COVID, as a result of his senseless tariff and immigration policies (I’m not necssarily anti-tariff, but at least try to have an objective and think out possible consequences–like destroying US agricultural exports to Asia–before putting them in place). On a longer view, he’s continuously undermining global faith in the dollar and the American banking system, as well as sowing the seeds for Shanghai to replace Wall Street as the world’s stock market capital. This will “hurt” China by speeding its ascent to world economic leadership.
In vintage Trump fashion, those damaged most badly by him have been his supporters.
In addition, Trump’s cognitive fastball, never of more than sandlot quality, seems to me to have regressed over the past year or so to somewhere south of mid-level Little League and slightly north of tee ball.
Despite all this, and in spite of his deeply anti-American cultural values, he may still be reelected.
As a citizen, this is not the outcome I want. As an investor, however, the implications are more straightforward. As I see it, initially:
–the Fed would continue to compensate for Trump’s bungling by running extra-stimulative money policy. In fact, the Fed has just signaled that it would be willing to let inflation run for a considerable while (we should be so lucky) to make up for the damage done by years of price level stagnation
–voter endorsement of Trump’s racism would reduce the attractiveness of American consumer brands in foreign markets; we could no longer say we didn’t know what he stands for
–ultra-low interest rates will underwrite continuing stock market strength
–the pattern of strong performance of stocks with the least connection to domestic GDP and deeply sub-par performance from those with the greatest GDP ties, would continue–as domestic capital continues to flee his incompetence and racism
–technology companies will maintain their Wall Street listings but would begin to shift their highest value-added operations to other countries, if for no other reason than to be able to hire based on talent. If Trump’s current attack on domestic research universities continues, this move could be surprisingly swift. The only plus here is that Xi’s attack on Hong Kong removes the SAR, the obvious non-US destination, from consideration for dual listings by US firms. Singapore?
–investment in cutting edge plant and equipment in the US by multinationals would likely decline.
The stock market I’ve been using as a very rough template for the US today is Mexico in the 1980s. A second aspect of this model, something that would have been unthinkable a few years ago, is the eventual loss of faith in the local government. This shows itself in a number of types of financial behavior: the “capital flight” character of the stock market that we’re now seeing in the US; a deteriorating currency; and eventually, capital controls imposed to prevent citizens/residents from shifting assets out of the country. We’re not there yet. Signs for worry: accelerating trade/current account deficits, national debt so large that potential buyers no longer believe they’ll be repaid in full.