Global Market Commentary

February 02, 2017

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Trump’s Plans Are Not Mysterious… He’s Fulfilling Campaign Pledges

The new administration’s whirlwind first days in office have led some observers to wonder what they’re up to. Regardless of what we think about the political or economic ramifications of new policies, it’s important for investors to orient themselves and have a grasp of what’s going on.

Mr. Trump is acting quickly to reward his voting base and fulfill promises he made during the campaign. If his business history is an indication — and we think it is — he will be working hard to get “huge,” visible results as quickly as possible.

In other words, if you want to know what’s coming, look at his promises: he’s making it a priority to deliver on them. Perhaps not in the total, brash form in which he first proposed them — but that first offer just represents the direction of his negotiation. (As we’ve often said, this is another thing that’s important to remember about Trump, a man who takes pride in his negotiation skills.)

The Script that Trump’s Following

What are the promises Trump made that allow us to orient ourselves in the disruption of this new administration? Here they are, culled from a handy summary Mr. Trump made in a speech in Gettysburg, PA in the last weeks of the election campaign. This list is worth studying; he has already started working on it.

First, six items attacking corruption and special interests:

1. Propose a Constitutional amendment to impose term limits on all members of Congress;
2. Implement a hiring freeze on all federal employees to reduce the federal workforce through attrition (exempting military, public safety, and public health);
3. Make a requirement that for every new federal regulation, two existing regulations must be eliminated;
4. Implement a five-year ban on White House and Congressional officials becoming lobbyists after they leave government service;
5. Make a lifetime ban on White House officials lobbying on behalf of a foreign government;
6. Implement a complete ban on foreign lobbyists raising money for American elections.

Next, seven items intended to support and protect American workers:

1. Renegotiate or withdraw from NAFTA;
2. Withdraw from the Trans-Pacific Partnership;
3. Designate China as a currency manipulator;
4. Direct the Secretary of Commerce and U.S. Trade Representative to identify all foreign trading abuses that unfairly impact American workers and use every tool under American and international law to end those abuses immediately;
5. Lift the restrictions on the production of American energy reserves, including shale, oil, natural gas and clean coal;
6. Allow energy infrastructure projects, like the Keystone Pipeline, to move forward;
7. Cancel billions in payments to U.N. climate-change programs and use the money to fix America’s water and environmental infrastructure.

Next, five items to address his base’s concerns about immigration and border security:

1. Cancel many executive actions, memorandums and orders issued by President Obama;
2. Select a Supreme Court nominee who is popular with his base;
3. Cancel all Federal funding to sanctuary cities;
4. Initiate the deportation of criminal illegal immigrants;
5. Suspend immigration from terror-prone regions.

And lastly, a number of longer-term initiatives contingent on working with Congress to implement.

The Middle Class Tax Relief and Simplification Act, which would reserve its largest tax reductions for the middle class, as well as lowering corporate taxes and making a deal for the repatriation of cash held overseas;

The End the Offshoring Act, which would establish tariffs to discourage companies from laying off their workers in order to relocate in other countries and ship their products back to the U.S. tax-free;

The American Energy and Infrastructure Act, to spur $1 trillion in infrastructure investment over ten years;

The School Choice and Education Opportunity Act, to allow parents to send their children to the public, private, charter, magnet, religious or home school of their choice, end Common Core, and expand vocational and technical education;

The Repeal and Replace Obamacare Act, to repeal and replace Obamacare and cut red tape at the FDA to speed drug approvals;

The Affordable Childcare and Eldercare Act to allow Americans to deduct childcare and eldercare from their taxes, incentivize employers to provide on-site childcare services, and create tax-free dependent care savings accounts for both young and elderly dependents, with matching contributions for low-income families;

The End Illegal Immigration Act, to fund the “border wall,” increase penalties for illegal immigrants who re-enter the country after deportation, and reform visa rules to enhance penalties for overstaying and to ensure open jobs are offered to American workers first;

The Restoring Community Safety Act to reduce crime, drugs and violence by creating a task force on violent crime and increasing funding for local and Federal law enforcement agencies — focusing especially on gang activity and violent offenders;

The Restoring National Security Act to eliminate the defense sequester and expand military investment; improve veterans’ benefits; protect U.S. infrastructure from cyber-attack; and establish new screening procedures for immigration;

And finally, the Clean Up Corruption in Washington Act to implement new ethics reforms to reduce the influence of special interests.

This Agenda Is the New President’s Road Map

Don’t be perplexed by the coverage of Trump’s policy initiatives. Just look at the road map: he drew it, and he’s following it — and we think he will continue to do so. The road map will allow investors who pay attention to it to judge what sectors and companies will benefit economically and enjoy favorable psychology as the agenda unfolds.

Investment implications: Trump’s policy moves are not mysterious; they are fulfilling his campaign pledges outlined above. The Trump administration is implementing policy very differently than predecessors, with a fast pace of initiatives in its first days and weeks. We note that Trump is actually following a script that he laid out during his campaign. We think the best thing investors can do to orient themselves is to pay attention to that script — and we think knowing the script will be the key to finding investment profits in 2017. As we always stress, we are market analysts. We do not take political positions. The political environment is like the weather: it is what it is — but if we want to benefit from it, we need to watch what’s here carefully, and prepare for what’s likely to come.

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