What the Markets Can, and Can’t Tell Us about a Trump Presidency
Politico reported that Treasury and Federal Reserve officials were monitoring the situation closely, prepared to take extraordinary action, if needed, to save the U.S. economy from free fall.
.. Pharmaceutical companies and private prisons saw their values rise, presumably rooted in a belief that President Trump will abandon efforts to rein them in. Gun stocks fell—a sign that Americans no longer fear a gun-control advocate in the White House.
.. Or, as John Maynard Keynes wrote, “We devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees.”
.. Trump has attacked every one of these foundations. How much should you pay for Apple stock, say, if we have to worry about the dollar plummeting in value and the President declaring a trade war on China, which is both Apple’s chief supplier and its fastest-growing market? There is no financial model, right now, for that many levels of structural uncertainty.
.. Markets are designed to make relatively minor adjustments on a fundamentally sound base. They never perform well when the base itself is under assault, as it was during the financial crisis of 2008.
.. Donald Trump’s proposed policies are, in this technical sense, toxic.
.. The repeal of Obamacare, alone, would force many people to forgo their riskier, entrepreneurial ambitions for the safety of a job with a health plan. Curtailing immigration will redirect the world’s most ambitious citizens elsewhere. A trade war with Mexico and China would be damaging in ways that are hard to fathom or measure. Trump’s tax plan will turn America’s serious but manageable debt burden into a crisis weighing on future generations.