A Trump Win: Investment implications -rising short term pain, longer term gain

A lot of investors including many who saw the Trump presidency at first as an impossibility are wondering where to go with their money if The Donald makes it to the White House. Indeed, they should start thinking about it.

Trump is after all blaming major US trade partners for the huge current account and trade deficits. So, we can expect some very hard nose tactics with some of these partners which should raise commercial tensions initially. He is particularly focused on Asia and Latin America.

American manufacturers overseas who are enjoying cheap labour and low currency advantages will be both shamed and incentivized to return to America more offshore production. This is clear given what Trump has said directly and with weekly repetition. Average politicians making such statements would be seen as just full of campaign hype. Trump can be very much less so with his special independent financial situation. Given his very strong campaign against unfair foreign trade and investment advantages, he cannot be seen as giving in too much companies be it Intel to Ford with their huge overseas investments.

The positives of Trump would be lower tax rates rates including ones that make it more possible for American multinational offshore money to be returned and be available for retooling existing plants and building new ones.

The question will be not how many American company plants he will cause to be shut down overseas but the added new production that will come state side would be my best guess as to how he would reduce disruption to US multinational balance sheets and ensure at the end of the day decent relations with Asia. Thus, any hype about Trump being compromising to USvmu,ti national interests is likely exaggerated bslkney.

The bad news from certain perspectives is he may start some initial trade wars by stepping up tariffs both within existing trade deals including the ones monitored by the World Trade Organization ones and regional agreements where he sees with his advisors great unfairness to America.

At this difficult global economic time, that may impact negatively economic activity with tit-for-tat retaliation despite whatever bravado political points Trump scores. It must be remembered that it was this behaviour that is believed to have made the Grest Depression deeper. He must move carefully overall to prevent small trade wars he may generate from amplifying to conflagration.

This state of tensions would likely not last with Trump who gets deals from those who have little favor for his flavor of style of doing business. Business is business and China, Japan and America need each other and Mexico, bordering the US must not be destabilized. Trump knows that.

As a first result of trade tensions, some product and input costs could go up under the Trump presidency. To say this will spike inflation would be likely an exaggeration. But the rhetorical tensions combined with a more robust military projection albeit of a “big stick” rather than eager Clinton-like intervention type will have a positive impact on gold and potentially currencies like the Swiss franc.

The added perceived short-term trade instability would be a more market friendly approach to gold. One area that might offset geopolitical risk for awhile is Trump’s better relations with Putin. This could mean the ruble rising especially with Europe and Trump wanting to reduce or eliminate sanctions. The Russian stock market could be a place yielding decent returns in 2017, and likely earlier especially in local currency.

Because of overall geopolitical risk rising along with likely US interest rates, the US dollar may not be so well positioned in 2017 to decrease against other currencies. Any serious weakness of the Chniese currency may be tempered by Trump’s anti-Chinese view on currency manipulation. US treasuries may see though some interest rate rises which for yield could make them more attractive.

In summary buy more gold and precious metals under a Trump presidency, more Swiss francs and maintain reasonable amounts of US dollars would seem rational. So begin looking at US treasuries after any potential Trump win or even possibly in a several months lead up to a predicted win.

Once the shake out of the international trade order has taken place or in anticipation of Trump winning concessions, may be a good time to buy the great American owned name brands like Cisco, GM, Ford, BP, Exxon etc.Because after Trump trade victories, or their pit rail as such,, the anti-trade politics will be much more dismissed.It will be more business than usual, globally.

After the moderate global tensions are mitigated from the Trump presidency, the US economy could further build on its productivity and greater consumption with rising wages in manufacturing including defense industries to some degree.

Stabilization of the trade order will benefit especially for competitive brand names in Canada, Japan and China as they move more or develop more production into the US with its lower Trump taxes and more foreign investment welcoming regimes.

The banks, on the other hand may not do so well for years but that is no surprise. Certain banks may find Trump worse than Occupy Wall Street. The new banking order may not be so pleasant in the Trump order. He has been particularly critical of Wall Street hedge funds.

Manufacturers, however, who play ball with the White House could see serious benefits in the end as well as commodity and the agri-complexes to a lesser degree and certain defense and high tech sectors.

The brutal world may face strong brutal Trump medicine causing some major initial pain. At first it will be a time for caution and for others to show vision and guts to much better get back into American manufacturing stocks of big name companies that are run well and to add more gold.

End of the Trump investment story brutal to moderate global economic pain, initial rising government deficits and interest rates but with a manufacturing renaissance in the end with rising decent consumption levels. Sounds a little bit like a more sophisticated Reagan era reinvented – you betcha.

How Hillary comes up with a better plan to rejuvenate America and add jobs is well beyond me. On the economy, I do not think she has enough of a competitive vision to ensure necessary restructuring and really more real results for American workers over years and deficit reduction in years ahead.

Stay tuned and see what she comes up with. Libya and Iraq, her brain child of overseas mayhem, instability and death and destruction should make even her progressive supporters worry as to what she will do to America and the World.

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