The New York Post
November 9, 2016
When the unexpected happens, like Britain exiting the European Union or a combustible reality TV star becoming president, investors begin to panic, markets begin to wobble and pundits predict economic Armageddon.
So let’s just be thankful that, after the election of Donald Trump, the market seems to have already stopped panicking. And with good reason: For all his shortcomings, Trump has one hell of a pro-growth economic plan that could save the country from the malaise of the last eight years.
That’s the takeaway from the so-far-positive market reaction to Trump’s big win over Hillary Clinton. But such common sense wasn’t a given.
When the polls looked like Clinton would win, particularly after FBI Director James Comey said she was once again in the clear over her legally dubious use of a private email server, the market rallied. Traders largely ignored her economy-crushing plans to raise taxes, impose more regulations and double down on President Obama’s zany policies like ObamaCare.
When Trump did the impossible and won the presidency, futures began to price in huge losses on the “crazy man” actually being in the White House.
And then something interesting happened: The buying began in the markets. Stocks traded up sharply, and though there was some predictable currency sell-off, particularly in the peso, and a rise in the dollar, the markets were largely stable.
The reason for this is pretty simple: Tuesday night and early Wednesday, while the political class and the lefty media were bemoaning a Trump victory, some savvy traders (mostly in hedge funds) began to wake up to the fact that Trump’s economic plans were far better than anything that Clinton could come up with.
And with that, the smart money did the opposite of what happened after the Brexit vote and began to buy the market on the notion that if Trump does what he says, and listens to some savvy economic advisers, the economy will break out of its Obama-induced slumber and stocks will do just fine even without the Fed manipulating shares by printing money.
Traders learned from Brexit that the initial market reaction was overwrought and markets recovered. It didn’t hurt, of course, that the GOP has retained power in both the House and the Senate, which allows for the passage of tax cuts, regulatory reform and the like without too much dealmaking with Democrats. The GOP congressional victories also effectively mute liberal Massachusetts Sen. Elizabeth Warren as a player on the banking committee, where she would’ve spent most of her time attacking banks and wealth creators.
But here’s what the smart money is banking on even more: lower taxes on individuals and corporations that will be pushed by one of the best economic policy wonks in the country, House Speaker Paul Ryan, and Trump’s already-assembled band of free-market economic gurus: Art Laffer, Larry Kudlow, Steve Moore and David Malpass.
Then there will likely be a reform of the Dodd-Frank banking bill that basically made it impossible for banks to make money and lend to small businesses. Trump, I am told, might even consider some way to reinstall the Depression-era Glass-Steagall law, which kept the banks from becoming so big that they nearly destroyed the financial system in 2008.
For all the GOP and Trumpian rhetoric about getting rid of ObamaCare, which is strangling middle-class Americans with massive premium hikes, the president’s signature health care law could be difficult to unravel anytime soon. Still, there appears to be enough political will to fix it. And for all of Trump’s anti-trade nonsense during the campaign (he once absurdly blamed Detroit’s woes on NAFTA), most people close to him say improving, not repealing, trade deals is his priority.
Of course, much of this depends largely on Trump himself, one of the most volatile people to have ever won the White House. During the campaign, he showed a disdain for taking others’ advice. Still, he was smart enough to surround himself with some great people, like his running mate, Mike Pence, the Indiana governor who understands the nitty-gritty of politics that Trump doesn’t bother with.
Rudy Giuliani is eyeing a spot as his Homeland Security secretary or secretary of state, I am told, and no one knows how to keep this country safe better than our former mayor. Wall Streeter Steve Mnuchin, a steady hand who understands that budgets need to be balanced with tax cuts, is a top choice for Trump’s Treasury secretary.
And there are others inside Trumpland, like hedge-fund impresario Anthony Scaramucci, who are planning this very minute to broker a peace between the president-elect and Speaker Ryan, at odds throughout the campaign.
The Ryan-Trump peace accord is crucial for Trump’s economic agenda getting through a still-fractious Congress, but the betting on Wall Street is that it happens. Let’s hope the smart money is right.
Article Link To The New York Post: