”’thinking out loud…
In 1991 the firm I was working for hired a political analyst. He was very shrewd but didn’t generate much revenue and was fired within a year or so. I still remember his characterization of the major political parties in the US, though–the Democrats have a social agenda but no economic program; the Republicans don’t believe in much of anything and were entering a potentially dangerous alliance with religious fundamentalists focused on triggering the end of the world (which they regard as a good thing). A third of a century later, this characterization seems to me to still be true.
It’s also my conclusion that a prime motivation for now-President Trump to run again must have been to put an end to his legal troubles–from sexual assault to falsifying business records to the violent attempt to overturn the election results when Biden defeated him in 2020. Personally, I regard the classified documents investigation as the most dangerous to Trump, but we may never know.
If this is correct, it raises the question of what positions Trump advocated during the campaign just to get elected vs. what he actually intends to do. Another wrinkle is the question of his increasingly bizarre behavior during campaign rallies and the related issue of the extent of his overall Biden-like cognitive decline.
Taking off my hat as a human being and putting on my analysis hat, it seems to me that:
–tariffs will make Americans poorer, so secular growth multinationals are probably a better bet than purely domestic firms. On the domestic front, maybe downscale retail deserves a second look. Walmart, too.
–another cut in the corporate tax rate may well also be on the cards. That would likely spark a one-time expansion of the market multiple, as it did in 2018. This could also intensify worries about the country’s ability to honor its Treasury bond obligations, however. That would play out through some combination of a decline in the dollar vs. foreign currencies–good for multinationals and exporters, bad for domestic consumers/firms–and a rise in interest rates. The latter would likely cause a contraction in PEs and lots of trouble for entities with variable-rate debt.
There are early signs that the tech billionaires who are the president’s new-found friends are also exerting an important influence on his thinking. The quarrel that’s just arisen with the EU over taxation of US-based multinationals is one sign. The apparent effort to block Chinese EV makers from manufacturing in Mexico is another–not that many decades of protection have done Ford or GM any good.