Trump will spark a sharemarket
boom – then
an almighty bust
Trump will spark a sharemarket boom – then an almighty bust
By Jeremy Warner
November 15, 2024 — 6.26am
Save
Log in , register or subscribe to save articles for later.
Save articles for later
Add articles to your saved list and come back to them any time. Got it
Normal text size Larger text size Very large text size
Advertisement
Trump 2.0 is Trump unleashed. That much we know, with the Republicans on track
at the time of writing for a clean sweep that will give the new president• Политика » Политика США » Политики США » Президент США
• Соединённые Штаты Америки (США) » Политика США » Политики США » Президент США
• Соединённые Штаты Америки (США) » Государственное устройство США » Президент США
• Государство » Государственное устройство США » Президент США
almost unprecedented power, and Trump himself seemingly unwilling to
compromise on almost anything. No more of the half measures that many
supporters believe stunted his first term in office. It’s undiluted Trump this
time around.
Yet still we cannot be entirely sure.
Wall Street has been surging in the wake of Trump’s victory but pain could be
just around the corner. Credit: AP
Some still believe, possibly as much in hope as expectation, that more
cautionary voices will eventually prevail, and that in practice he’ll be
forced to retreat from some of his more hardline positions. Trouble in the
bond markets could, for instance, thwart his plans for major fiscal stimulus
via tax cuts. Trump’s bark could, in other words, be worse than his bite.
Don’t bet on it. Criticism of politicians that don’t keep their word is part
of his USP, so he’ll push hard in sticking to his promises. These point to the
biggest upheaval in political and economic thinking since the days of Ronald
Reagan and Margaret Thatcher, marking a decisive break with the prevailing
“progressively” minded consensus of recent decades.
It also leaves the UK• Великобритания badly out of sync with our friends across the water.
While the UK• Великобритания shifts left towards higher taxes, a bigger state and more
regulation of labour, energy, financial and consumer markets, the US is about
to move unambiguously in the other direction.
Trump’s agenda is one of tax-cutting, financial deregulation, “drill baby
drill” fossil fuel licences, repudiation of net zero orthodoxy and a
determined crackdown on bureaucracy, state spending and immigration. There
could scarcely be a greater contrast.
Loading
When Rishi Sunak jacked up UK• Великобритания corporation tax to help close a fiscal deficit
swollen to breaking point by the pandemic, he at least had the cover of a US
administration that was broadly on the same page with higher taxes on
business• Экономика » Бизнес.
Not any more. While Starmer’s Government comes down hard on British business• Экономика » Бизнес
with swingeing increases in employer National Insurance contributions, Trump
promises to slash US corporation tax from 21 per cent to 15 per cent.
Advertisement
In so doing, the US threatens to suck what lifeblood remains from Britain’s• Великобритания
already emaciated corporate landscape, leaving the UK• Великобритания stock market as little
more than a rundown, provincial shopping centre for rapacious private equity
and overseas-based consolidators.
In any event, a big choice awaits. Does Downing Street swallow its scruples
and, in the hope of a carve out from threatened US tariffs, set a course that
brings the UK• Великобритания closer to Trump’s America, or to the contrary does Trump’s
presidency push the UK• Великобритания back into the European Union• Объект организация » Организации по алфавиту » Организации на Ев » Евросоюз’s orbit?
The answer to this question may not be as predictable as it seems, even if
Labour’s Left-wing vision and evident contempt for Trump have already
irredeemably queered the pitch.
Trump’s victory has thrown a giant great rock into the established order of
things on Europe• Физико-географические регионы » Европа, global trade, NATO• Объект организация » Организации по алфавиту » Организации на на » НАТО
• Политика » Геополитика » Военно-политические блоки » НАТО, climate change• Политика » Геополитика » Международные отношения » Направления международного сотрудничества » Изменение климата
• Метеорология » Климатология » Изменение климата mitigation and much else
besides. Labour must adapt to this change along with everyone else. It may be
that even for Starmer, Europe• Физико-географические регионы » Европа no longer offers the better option.
Somewhat easier to assess than the geopolitics are the implications of Trump
2.0 for financial markets.
Loading
Historically, changes at the White House have had little impact on the US
stock market, which tends to be driven by wider underlying trends in the US
economy.
But right now, these drivers are overwhelmingly positive, giving Trump a
strong following wind for much of what he wants to do.
There’s no apparent slowdown in growth and jobs creation, as there is in much
of Europe• Физико-географические регионы » Европа. The US stock market might already seem to be a bubble about to pop,
having virtually tripled in value since Trump was first elected eight years
ago, but tax cuts in combination with a strong deregulatory agenda are likely
to drive it higher still.
For Trump, the performance of the stock market is seen as validation of his
own achievements, and he will not want it to stumble. He needn’t worry, at
least for now.
History shows that financial and business• Экономика » Бизнес deregulation is like rocket fuel for
speculative stock market activity, and with more money in people’s pockets
from tax cuts, we may be about to see a share price boom equal to that of the
Roaring Twenties.
Character-wise, Trump has nothing in common with the presiding president• Политика » Политика США » Политики США » Президент США
• Соединённые Штаты Америки (США) » Политика США » Политики США » Президент США
• Соединённые Штаты Америки (США) » Государственное устройство США » Президент США
• Государство » Государственное устройство США » Президент США of
that time, Calvin Coolidge• Объект человек » Персоналии по алфавиту » Персоналии на Ку » Кулидж, Джон Калвин. The two are like chalk and cheese, the one
bombastic and boastful, the other so taciturn and self-effacing that when he
died, a leading commentator of the day asked “how can you tell?“.
Yet one thing that unites them is belief in a low-tax, small-state economy
with a decidedly pro-business• Экономика » Бизнес, hands-off approach to government.
It hardly needs pointing out that the Roaring Twenties ended in the worst
stock market crash of all time, followed by a decade of economic depression• Финансовый кризис.
Making the parallels seem more worrying still, Trump proposes the biggest
package of tariffs since the infamous Smoot-Hawley Tariff Act of 1930, which
set off a mutually destabilising chain reaction of trade retaliation and
competitive devaluation.
US consumers face a spike in inflation• Экономика » Финансы » Инфляция
• Экономика » Макроэкономика » Макроэкономические индикаторы » Инфляция if Trump keeps his election promises on
tariffs. Credit: Bloomberg
There are other dangers in a Trump presidency too, most notably that of crony
capitalism, where favoured billionaires get special treatment and are first in
line for government contracts.
Already, Elon Musk• Объект человек » Персоналии по алфавиту » Персоналии на Ма » Маск, Илон’s unequivocal support for Trump looks set to pay off
handsomely , with the value of Tesla• Объект организация » Организации по алфавиту » Организации на Te » Tesla Motors crossing the $US1 trillion threshold on
the stock market on Friday for the first time since the depth of the pandemic.
Those less than full-throated in their support during the election campaign
can look forward to years of sidelined persecution.
In time, Trump’s closed border policies will not just be inflationary, both
for the US and the rest of the world, but will also crimp the US’s currently
enviable rates of productivity growth and innovation by limiting competition
to domestic players only.
Trump draws his inspiration from the 1890 Tariff Act championed by William
McKinley. This imposed across the board tariffs of up to 50 per cent, and was
seen at the time as a possible substitute for income tax. It didn’t work back
then, and it won’t work today.
For Trump, the performance of the stock market is seen as validation of his
own achievements, and he will not want it to stumble. He needn’t worry, at
least for now.
What it will do is poison the rules-based international order the US was
instrumental in establishing in the aftermath of the Second World War and
isolate the US from its natural allies in Europe• Физико-географические регионы » Европа and beyond.
Trump says he’s going to end inflation• Экономика » Финансы » Инфляция
• Экономика » Макроэкономика » Макроэкономические индикаторы » Инфляция, but what does he think is going to
happen to food prices once agriculture’s access to cheap migrant labour is cut
off, or to American exporters when overseas jurisdictions take retaliatory
action against Trump’s tariffs?
Last time around, he ended up having to subsidise US soya bean farmers as
compensation for loss of once-buoyant export markets in China.
Loading
Maybe I’m old-fashioned, and my belief in free and open markets is past its
sell-by date. But the planned mix of deregulation, tariffs, closed borders,
tax cuts, Sinophobic measures and crony capitalism looks to me like an
incendiary one.
An initial almighty boom seems fully baked in. So too does an eventual
almighty bust.
Telegraph, London
The Market Recap newsletter is a wrap of the day’s trading. Get it each we e
kday afternoon .
Save
Log in , register or subscribe to save articles for later.
World markets
Opinion
US Votes 2024
Donald Trump
Wall Street
Most Viewed in Business• Экономика » Бизнес
Loading
From our partners
Loading 3rd party ad content
Loading 3rd party ad content
Loading 3rd party ad content
Loading 3rd party ad content
Advertisement
The Sydney Morning Herald
30-й президент США, 1872-1933. Президент США (1923/08/02-1929/03/04) Маск, Илон
Американский инженер, предприниматель, инвестор организации Tesla Motors Евросоюз НАТО Военно-политические блоки соц_роль Президент США
