Donald J. Trump will take the oath of office Friday, January 20. This fact is disorienting for many but viewed as promising by others. Trump’s election is part of the larger picture, that we live in a new age of uncertainty, suspended between an old order and a new one being formed. “Business as usual” has been rejected.
Anthropologist Victor Turner describes this as the liminal zone, from the Latin word limen, meaning “a threshold”. As described by Wikipedia, a liminal period can be seen as a period of scrutiny for central values and axioms of the culture where it occurs.
In this week’s curated articles we examine how regime change may look going forward, with a third article cautioning that politics can sway investing:
Reflections on the Trump Presidency, One Month After the Election. According to Ray Dalio of Bridgewater Associates, the world’s largest hedge fund, it is increasingly obvious that we are about to experience a profound, president-led ideological shift that will have a big impact on both the US and the world. This will not just be a shift in government policy, but also a shift in how government policy is pursued. Trump is a deal maker who negotiates hard, and doesn’t mind getting banged around or banging others around. He has chosen people to surround him that have a similar bent. This new administration admires strong, can-do, profit makers. It wants to, and probably will, shift the environment from one that makes profit makers villains with limited power to one that makes them heroes with significant power. This particular shift by the Trump administration could have a much bigger impact on the US economy than one would calculate on the basis of changes in tax and spending policies alone, because it could ignite animal spirits and attract productive capital.
Luminous Times: Looking Ahead With Optimism About 2017. Early in 2017 we will all start grappling with the connection (or possible lack thereof) between campaign promises and policy reality. President-elect Trump has elevated tax cuts/reform, increased fiscal spending, and regulatory overhaul to the top of the priority spectrum—all laudable pro-growth policies. However, the continued pressing of his isolationist, anti-trade, and pro-tariff promises could serve as a detrimental offset to the pro-growth agenda. Despite these factors, Liz Ann Sonders and the analysts at Charles Schwab & Co., Inc. share the optimism documented by several well-watched indicators as it relates to the U.S. stock market in 2017. But, the trajectory of gains will likely not be as fierce as witnessed immediately post-election. The summary of Schwab’s 2017 outlook highlighted that “animal spirits” have been awakened after a long slumber.
Politics Can Sway Investing. People’s optimism towards financial markets and the macroeconomy is dynamically influenced by their political affiliation and the existing political climate, according to a 2012 paper entitled Political Climate, Optimism, and Investment Decision. Individuals become more optimistic and perceive the markets to be less risky and more undervalued when their own party is in power. These shifts in perceptions of risk and reward affect investors’ portfolio decisions. Investors can make mistakes because they aren’t aware of how their decisions can be influenced by beliefs and biases.
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Disclosure – The articles mentioned in This Week with J. Mark Nickell & Co. are for information and educational purposes only. They represent a sample of the numerous articles that the firm reads each week to stay current on financial and economic topics. The articles are linked to websites separate from the J. Mark Nickell & Co. website. The opinions expressed in these articles are the opinions of the author and not J. Mark Nickell & Co. This is not an offer to buy or sell any security. J. Mark Nickell & Co. is under no obligation to update any of the information in these articles. We cannot attest to the accuracy of the data in the articles.