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Is The Honeymoon Phase Of Trumponomics Over?

  • Ben Hayward
  • Mar 27, 2017 5:17PM

Well folks, it may be that the honeymoon phase of Trumponomics is over. Following a dip in Asian markets and multi-billion dollar decline in the British FTSE 100 at the open of the markets today, American markets followed suit by taking the biggest drop since election day.

“The Standard & Poor's 500 index fell 5 points, or 0.2%, to 2,338, as of 11:42 a.m. Eastern Time. It had been down as much as 0.9% earlier in the day.

The Dow Jones industrial average fell 63, or 0.3%, to 20,533, and the Nasdaq composite slipped 4 points, or 0.1%, to 5,823.

Small-company stocks fell more than the rest of the market. The Russell 2000 index fell 5 points, or 0.4%, to 1,348. They had been outpacing the market since the presidential election.” (via L.A. Times)

While the Euro, Pound, and Yen all rose, the Dollar took a dip of 0.31 against the Yen. Treasury yields fell by 0.3% and financial stocks, banks in particular, fell by 0.9%, with Morgan Stanley posting a loss of 3.3%., while U.S. crude dropped 31 cents a barrel. Overall, it is fair to say that today was not a good morning on Wall Street.

While opinions differ, the consensus appears to be that this is in response to the Republican house’s failure to repeal and replace the ACA last Friday. Moreover, its failure to even make it to a vote was seen by the international investment community as cause for concern.

The growth the market has seen since the election has been largely predicated on the belief that a Trump presidency and Republican house would be friendly to business. Trump was elected on promises to cut income taxes, to loosen restrictions on big business and to provide incentives for ‘job creators.' But now it seems he and Paul Ryan are going to have more difficulty passing legislation than they initially anticipated.

This could be very bad news for the folks who are counting on the new regime to deliver on the business incentives they promised.

Kathleen Brooks, research director at City Index wrote this morning, “The markets are having their own ‘Trump tantrum,’ as investors seriously doubt whether the president’s abrasive style will work in Washington.” She went on to characterize today's events, and the market behavior that she anticipates will follow as a ‘disappointment trade,' meaning that the President’s ability to deliver on his agenda is directly linked to the behavior of American, and consequently global, markets.

I don’t know about you, but I find that less than comforting.