How will the results of the election affect Wall Street and the overall economy?

Title says it all, i'm very curious to hear people's thoughts. How will the Trump presidency affect the markets / Wall Street?

Comments (72)

 
11/8/16

Wall Street will react predictably in the short term.

Long term it doesn't fucking matter. Financial policy is set by Congress, NOT the president so expect business as usual there.

In terms of other things the die is more or less cast. Social security becomes a net negative cash flow next year regardless, the interest rate environment is unsustainable regardless, and governments worldwide are going to start aggressively hunting capital regardless(because they're broke).

Bottom line we're going to shit either way. It just depends whether we're going to do it with humor or with class.

 
11/9/16

what are your thoughts now that the Republicans have Congress and Trump?http://www.wallstreetoasis.com/forums/republican-l...

 
11/8/16

Easy answer--go check the markets right now (stock futures, mexican peso, etc.).

 
11/8/16

Doesn't mean jack shit for the long term. Remember when people thought it was the end of the world back in January?

 
11/9/16

Please correct me if I'm wrong, but M&A environment doesn't seem to look too promising after this? I would say this with confidence in most other situations, but given that M&A picked up post-Brexit it seems like a toss up.

 
11/9/16

Nothing's gonna happen in the long term. Trust the media to get people worked up over nothing.

 
11/9/16

the biggest drivers of the markets are not who occupies the white house. here's what to expect, assuming the Donald doesn't fly off the handle and upper deck the King of Saudi Arabia's golden toilet...

  1. against a backdrop of improving economic growth, rates will rise. this was in place before last night's result. I put the 10y at 4% by end of 2018, write it down. this means that bond funds will take a hit but unless there's panic selling, it will just be losses due to opportunity cost. laddered portfolios and higher relative coupons will perform fine.
  2. stock market will continue to have 1-2 10-20% corrections a year. we had 2 this year, 1 last year, with high valuations and weak guidance, expect volatility to continue.
  3. that being said, expect 5-10% annual returns for the next 3 years as corporations grow their way out of high multiples and the risk premium over bonds lowers as rates rise.
  4. expect consumer spending to pick up. lower tax rates across the board generally means more money in people's pockets to spend, and since that's over 65% of GDP, this could be meaningful
  5. also expect infrastructure spending to pick up, adding to GDP just by pure math (remember gov't spending goes into this equation).
  6. expect a repeal of obamacare. with a GOP sweep, this is all but inevitable. for the sake of the uninsured or barely insured, I'd hope that there are state programs to help the needy, but this will make the cost of running a small business go down, potentially increasing hiring, but at a minimum putting money back in some people's pockets and being generally good for healthcare stocks.
  7. expect lots of rhetoric around a trade war, but it's impossible to say at this point. my hope is that Donald was mostly talk and that we don't close our borders, because most of the US's greatest companies are multinationals and any increased tariffs could hurt earnings meaningfully. that being said, if in the new tax plan there's a mechanism for repatriation of offshore cash, companies could boost capex and in the future offset earnings lost to tariffs with greater productivity. I'm playing a wait & see with this however, still too early to tell.
  8. hard to say on banks and M&A. if Trump repeals Dodd Frank, private credit and alternative lending will tank, and banks will be able to lend again, making working at a BB much more glamorous. if Trump appoints pro competition people to the Justice Dept that don't want mega deals, I'd expect more of the same. however, if he appoints people who don't particularly care about Bayer/Monsanto, ATT/TW, etc., M&A could pick up meaningfully assuming offshore cash is allowed to come home. good time to be a banker.
  9. USD strength. this is a negative for multinationals and int'l stocks that trade largely with the US. also negative for EM equity and debt for major US trading partners. all of this assumes the Donald will get tough on trade. the way to play this is stick with mid & small caps, most of their revenue will be onshore (unlike say PG where over 50% is offshore), so they will be better insulated.
  10. what remains to be seen is how one party control will play out. yes, policy will get passed, but how will this affect markets? if you look at averages (not perfect by any means), an all red gov't gives you below average returns in stocks. my thoughts on valuation kinda agree with this, so if we have 3-7% returns on stocks for the next 4 years, I wouldn't be surprised.
  11. I think now the possibility of Marine Le Pen getting elected in France is much higher. Sarkozy will not have a cakewalk, and this speaks volumes about Western Europe. if the Bundestag goes populist in 2017, look out Eurozone, you're fucked. @Matrick @GoodBread feel free to disagree, just my $0.02.

most of the negativity around Donald has little to do with economics and a lot to do with his demeanor and mannerisms. if he does decide to default on US debt (doubtful), that would be bad. if he does close our borders (doubtful), that will be bad. however, if his anti trade legislation is offset by pro growth tax policies and repatriation of offshore cash combined with more after tax dollars in people's pockets due to no more ACA, we could see a nice bounce in the economy.

tldr: people freaked out, Donald isn't an ideal choice by any means from a societal/social perspective, but from an investor's perspective, there's a lot of upside opportunity.

 
11/9/16

Good post.

That said I don't buy the trade war. If you go back pre-election and look at some of the full statements here he doesn't seem to actually want to repeal NAFTA, he just thinks its ridiculous that China has protectionist policies against the US(so he can't won Real Estate in HK/Beijing) while the US has none against China. I'd expect him to be lobbying hard against Asian protectionism.

 
11/9/16

So...how's the book of yours coming along? ;)

How do you think the election affects the housing market for potential buyers?

 
11/9/16

assuming tax policy passes unabated...offsetting affects from lower taxes meaning more cash in people's pockets offset by potential overall tax reform (assuming mortgage interest deduction goes away).

I don't think it affects it much, housing prices are driven by different factors, I think the biggest head/tailwind you have is demographics. as the economy plugs along, millenials (biggest generation approaching homebuying age) will buy houses regardless of trump, harambe, or deez nuts being POTUS

 
11/9/16

also, still no book deal haha. I bet if you added up all my posts on WSO, it'd barely be 20 pages however.

 
11/9/16

Great post, thanks for talking me off the ledge. Still doesn't feel quite real.

 
11/9/16

Do you think that this election will have an impact on rates rising? Rates increasing in the long-run seemed to be consensus (to some extent) prior to the election. Does Trump change the rate outlook at all? Or is it a case of rates were always going to rise.

 
11/9/16

rates will rise for one reason: the economy is improving. that being said, they will not spike because we're still possessing higher rates than dev europe or jpn.

 
11/9/16

+1 SB for informative thoughts :)

...

 
11/9/16
"thebrofessor" wrote:

8. hard to say on banks and M&A. if Trump repeals Dodd Frank, private credit and alternative lending will tank, and banks will be able to lend again, making working at a BB much more glamorous. if Trump appoints pro competition people to the Justice Dept that don't want mega deals, I'd expect more of the same. however, if he appoints people who don't particularly care about Bayer/Monsanto, ATT/TW, etc., M&A could pick up meaningfully assuming offshore cash is allowed to come home. good time to be a banker.

I really hope you're right. Does anyone know of the likelihood dodd frank actually gets repealed? and prop trading returns?

 
11/9/16

He's said he will, I think it's too early to call

 
11/9/16

Regarding point 9, Aren't we expected to see a weakening in USD? Given Trump's talk about China's currency manipulation and his stance on trade, wouldn't this lead to potentially less foreign capital inflows and thus a weaker USD? Please correct me if these points are incorrect.

 
11/9/16

My thinking there is it depends on the index you look at. Our currency could be strong relative to EM because of balance of trade relative to the US (we import from them). It could be strong relative to the basket of 6 because our rates remain better than abroad, assuming trump doesn't call into question our propensity to pay our debts. This probably would've happened without trump, but if he starts a trade war and hurts our international neighbors, since we're net importers our currency should benefit

 
11/10/16

Sb'd, thanks for the follow-up.

The thesis here is that if Trump institutes a trade war you're thinking that foreign capital will increasingly be allocated to the US 1) given the higher rate environment and 2) capital will be diverted away from our trade partners due to the potential protectionist policies making exporting supply for these countries more costly.

These factors will offset the rising prices and dollar depreciation created through the protectionist policies.

So, net-net our currency will strengthen.

 
11/10/16

more or less.

what I'm saying is keep in mind currency is a relative game. if our EM trading partners' economies go down because we trade less, their currencies will suffer, making ours look better on a relative basis.

DM int'l currencies (basket of 6) will look worse relative to USD mostly because of capital allocation favoring US given our higher rate environment.

 
11/9/16

Hi Brofessor! I have a question. Do you think havingTrump elected could potentially put at risk an offer that I have at Goldman Sachs? (It is for Operations in Salt Lake City) Thanks for your input

 
11/9/16

A caveat to his tax plans and infrastructure spending (which are both expansionary fiscal policies) is how the two will be financed? Trump's fiscal policy may balloon the debt more and increase the public and private debt burdens.

 
11/10/16

Completely agree, he's given very little info as to how this would be paid for

 
11/9/16

"6. expect a repeal of obamacare. with a GOP sweep, this is all but inevitable. for the sake of the uninsured or barely insured, I'd hope that there are state programs to help the needy, but this will make the cost of running a small business go down, potentially increasing hiring, but at a minimum putting money back in some people's pockets and being generally good for healthcare stocks."

why would this be good for healthcare stocks? less people would be insured which brings instability to their payer mix and thus revenues and earnings, no? Maybe from a compliance/quality standards perspective they could cut corners and boast earnings?

curious to hear more on this

 
11/9/16

No, it would remove the necessity to be a part of the exchanges which have largely been a negative for earnings, look at unitedhealthcare in particular. Also one can assume that ACAs repeal is indicative of a favorable regulatory environment in healthcare (pharma, mes device), and if those companies retain pricing power, it will be good for earnings. What could suffer is healthcare reits however as whoever was covered under ACA uses the system less, but I don't invest there so not as well versed

 
11/10/16

I guess I was talking about earnings at the provider level ie health systems and other facilities, which would be negatively impacted by less people being covered. In reference to insurers, regardless of how earnings have been lately, PPACA mandates everyone buy their product, meaning they can always increase premiums to boost earnings, no? I am pretty sure premiums can only be adjusted at the time of enrollment, so if their risk pool is shit (since they can't deny for pre-existing conditions under PPACA), I imagine they will take a hit on earnings in current year and adjust premiums for the next.

I am not sure of how PPACA influences pharma and other healthcare oriented industries, but pharma in the US is a cluster fuck. I am not in favor of price ceilings, but there are ways to increase competition to keep pricing reasonable. That's a rabbit hole I don't feel like going down

 
11/10/16

no argument on pharma being a cluster fuck, but as the world is today, ACA repeal/rejiggering will be good for those stocks.

you're right on insurers, that's exactly my point. when I say healthcare stocks, I mean insurers, pharma, med device, not healthcare REITs and hospitals, the economics of those are different.

 
11/14/16

Don't points 3 and 10 contradict one another? Or am I missing something? Could you elaborate @thebrofessor

The fool thinks himself to be a wise man, while the wise man thinks himself to be a fool.

 
11/15/16

good observation. I should've clarified that my base case is 5-10% but I wouldn't be surprised if it was lower, like 3-7%

 
6/22/17
"thebrofessor" wrote:

the biggest drivers of the markets are not who occupies the white house. here's what to expect, assuming the Donald doesn't fly off the handle and upper deck the King of Saudi Arabia's golden toilet...

    - against a backdrop of improving economic growth, rates will rise. this was in place before last night's result. I put the 10y at 4% by end of 2018, write it down. this means that bond funds will take a hit but unless there's panic selling, it will just be losses due to opportunity cost. laddered portfolios and higher relative coupons will perform fine.
    - stock market will continue to have 1-2 10-20% corrections a year. we had 2 this year, 1 last year, with high valuations and weak guidance, expect volatility to continue.
    - that being said, expect 5-10% annual returns for the next 3 years as corporations grow their way out of high multiples and the risk premium over bonds lowers as rates rise.
    - expect consumer spending to pick up. lower tax rates across the board generally means more money in people's pockets to spend, and since that's over 65% of GDP, this could be meaningful
    - also expect infrastructure spending to pick up, adding to GDP just by pure math (remember gov't spending goes into this equation).
    - expect a repeal of obamacare. with a GOP sweep, this is all but inevitable. for the sake of the uninsured or barely insured, I'd hope that there are state programs to help the needy, but this will make the cost of running a small business go down, potentially increasing hiring, but at a minimum putting money back in some people's pockets and being generally good for healthcare stocks.
    - expect lots of rhetoric around a trade war, but it's impossible to say at this point. my hope is that Donald was mostly talk and that we don't close our borders, because most of the US's greatest companies are multinationals and any increased tariffs could hurt earnings meaningfully. that being said, if in the new tax plan there's a mechanism for repatriation of offshore cash, companies could boost capex and in the future offset earnings lost to tariffs with greater productivity. I'm playing a wait & see with this however, still too early to tell.
    - hard to say on banks and M&A. if Trump repeals Dodd Frank, private credit and alternative lending will tank, and banks will be able to lend again, making working at a BB much more glamorous. if Trump appoints pro competition people to the Justice Dept that don't want mega deals, I'd expect more of the same. however, if he appoints people who don't particularly care about Bayer/Monsanto, ATT/TW, etc., M&A could pick up meaningfully assuming offshore cash is allowed to come home. good time to be a banker.
    - USD strength. this is a negative for multinationals and int'l stocks that trade largely with the US. also negative for EM equity and debt for major US trading partners. all of this assumes the Donald will get tough on trade. the way to play this is stick with mid & small caps, most of their revenue will be onshore (unlike say PG where over 50% is offshore), so they will be better insulated.
    - what remains to be seen is how one party control will play out. yes, policy will get passed, but how will this affect markets? if you look at averages (not perfect by any means), an all red gov't gives you below average returns in stocks. my thoughts on valuation kinda agree with this, so if we have 3-7% returns on stocks for the next 4 years, I wouldn't be surprised.
    - I think now the possibility of Marine Le Pen getting elected in France is much higher. Sarkozy will not have a cakewalk, and this speaks volumes about Western Europe. if the Bundestag goes populist in 2017, look out Eurozone, you're fucked. @Matrick @GoodBread feel free to disagree, just my $0.02.

most of the negativity around Donald has little to do with economics and a lot to do with his demeanor and mannerisms. if he does decide to default on US debt (doubtful), that would be bad. if he does close our borders (doubtful), that will be bad. however, if his anti trade legislation is offset by pro growth tax policies and repatriation of offshore cash combined with more after tax dollars in people's pockets due to no more ACA, we could see a nice bounce in the economy.

tldr: people freaked out, Donald isn't an ideal choice by any means from a societal/social perspective, but from an investor's perspective, there's a lot of upside opportunity.

I must say I just saw this and am quite offended.

 
11/9/16

Buy silver and gold?

 
 
6/22/17

shouldve bought copper

 
11/9/16

What I'm still not sure about is wall building and trade barriers. Do these happen? Paul Ryan is a pretty smart budget guy and knows his way around fiscal stuff, surely he'll be able to lead too much of a push against a real wall and real Chinese and Mexican trade barriers. Plus, Ryan and Trump sat down a while back so they have to have some form of an understanding on a way forward around those two issues.

"Loser terrorists" & "bad hombres"

"Typical candidates are those who attended a top-tier academic institution"
-Most job applications

 
 
6/22/17

Don't even waste your time trying to trade the news.

 
11/9/16

RIP MXN

I AM THE LIQUOR

 
 
11/9/16

another day, another dollar...

"I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing. "
-GG

 
 
6/22/17

Almost nobody outside the US is in camp 2

 
6/22/17
"Patrick Batman" wrote:

Almost nobody outside the US is in camp 2

Brexiteers (aka a majority of Britains).

PS you can all stop pretending you think Trump is a biggot to try and sway the vote.

 
6/22/17

Even most brexiteers do not understand how someone who is corrupt, accused of sexually assulting women, bragging about how he grabs women by the genitals, racist, xenophobic, not denouncing the endorsement of the KKK, convinced that climate change is a hoax and and and ... can be the president of the US.

Even if he might not follow up on most of his simply retarded remarks, this is a punch in the face for humanity. Even if he isn't a biggot, he sure loved behaving like one during his campaign.

Happy to receive MS from Trump fanboys for this post.

 
6/22/17
"Patrick Batman" wrote:

Even most brexiteers do not understand how someone who is corrupt, accused of sexually assulting women, bragging about how he grabs women by the genitals, racist, xenophobic, not denouncing the endorsement of the KKK, convinced that climate change is a hoax and and and ... can be the president of the US.

Even if he might not follow up on most of his simply retarded remarks, this is a punch in the face for humanity. Even if he isn't a biggot, he sure loves looking like one.

Happy to receive MS from Trump fanboys for this post.

No MS. You are the victim in all this. Hoaxed by the media. You should look into each of these stories more in depth.

Do you believe investor relations when they tell you their company is best-in-sector?

 
6/22/17

I am biased by the people I know in the US and by the media I consume but this can only go to a certain degree.

It's not "investor relations" saying things - it's the comments the Donald makes himself. So are you telling me that his recordings, debates, speeches and interviews are a hoax by the media??

 
6/22/17

I think you forgot Camp #4: "Not ideal, but what can you do? All the more reason to get excited for Yeezus in 2020."

I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing.

See my Blog & AMA

 
6/22/17

"The man is a racist"

isn't every republican candidate and constituent?

I am pretty sure anyone worth a fuck does not care about someone's race. They only care about two things: will you be good for me? will you be bad for me?

 
6/22/17

"The only colour these people care about is green."

I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing.

See my Blog & AMA

 
6/22/17

Unbelievable is all I can say.

 
6/22/17

They're all a bit surprised and a bit worried. They're trying to find non-issues and make them into serious areas of concern (e.g. that he's white).

Pretty much the idiocy you see in the majority of the American media.

 
6/22/17

Here now they changed the tune a little bit, not worried about him unleashing a nuclear war, but apparently on shooting foreign tourists and people who live in the States, after all 'America hates foreigners" as a journalist already said. LOL

 
6/22/17

4 - Wait and see what he can/can't do. If you're flipping out now you clearly don't understand the checks and balances put in place to prevent presidents from becoming dictators. The liberals who are crying and rioting in the streets are pretty pathetic and the fact they suddenly think all their rights will be stripped away is sad.

 
6/22/17

True. To me it shows that some people don't really trust democracy (even with all the issues bla bla bla), unless of course their candidate wins, then people are supposed to trust the same democracy.

 
6/22/17

I recommend reading Richard Neustad's book on "presidential power and the modern presidents" for anyone that doesn't understand the comment of @lordbendter

 
11/9/16

Jamie Dimon is a stud.

Here is the letter he sent out in light of the election:

http://fortune.com/2016/11/09/read-the-letter-j-p-...
He should have run for President.

 
11/9/16

that's because Jamie is rational. Trump is a despicable human morally, but could be a stud for the economy, we'll see. he could end up being just as much of a dunce as he sounds, but Dimon wisely sees the bigger picture (good growth backdrop).

fear is rational if you think he'll build a wall and you're trying to get the rest of your family over here. fear is rational if you're a muslim trying to get your family over here or be able to move freely in and out of the country. fear is rational if you're a job outsourcer to china.

fear, however is not rational if you just don't "like" trump and you're upset because a hothead republican (it pains me to even put him in the same party as guys like Mitt Romney) got elected. most of this country is reacting with their hearts, when in reality, Donald Trump will not have an impact on the daily lives of most Americans (I think the same thing about Hillary, in case anyone's curious).

 
11/9/16

There will be wage growth, bigly. Illegals will be deported giving pay raises to people who have not had a pay raise(or consistent work) in ages. These people have the highest marginal propensity to spend and spend they will. Additionally, legal immigration will (thankfully) be lower along with a strong economy which will result in further wage growth and job security.

The balance of power will swing from the employer to the employee(marginally). I view this as being a positive to the economy because I believe wage growth begets GDP growth. Job security makes people feel better about themselves and their economic prospects thereby further spending increases. This may also give more confidence to Americans to have more kids which is obviously good for the economy and future generations.

My prediction is Trump will be the best president we've had since Ronald Reagan.

Learn to LOVE Trump in less than 3 minutes

 
11/10/16

Hmmm... I think if you look at the underlying factors of your rhetoric, they actually point to a deceleration of wage growth and declining rate of consumption.

Consumption:

Given your example of deporting illegals and giving their jobs at a higher wage to "native" born Americans, these increased costs will eventually be passed to households in the form of higher prices. With an increase in the price of goods, households will have less real income to spend. This means that households will have a higher savings rate. The excess savings will either have to be exported or imports will have to be curtailed. Also, remember that the out-of-work Americans are still receiving welfare or unemployment and were still consuming anyways. Once back in the labor force the savings created by their employment will exceed any incremental consumption by the worker (given the parameter that wages < revenue of good / service).

Pretty much your example of the "native" American regaining his job and being America's growth engine is a pipe dream. All these shifts are transmitted. In this case, we'd actually see consumption rates fall (i.e. higher savings rate) as we pursued greater workforce employment. There are trade-offs for all these policies. The Brits leaving the EU are in this boat using this quasi-isolationist thinking. Will they be willing to face the trade-off that greater domestic production and thus domestic employment also means financial / consumption repression?

Wage Growth:

The United States currently has a technological advantage relative to the much of the world and thus is an exporter of skilled labor (e.g. software) and importer of capital-intensive goods.

This skilled labor (e.g. tech workers) has had their wages grow at an order of magnitude higher than unskilled labor (e.g. farm worker).

Given Trump's anti-immigration stance and quasi-protectionist stance on trade, capital and technological investments would have higher input costs. This would be in the form of higher salaries to attract a declining number of skilled tech workers and the incremental costs of tariffs foreign and thus disincentive firms to invest in the tools that would increase worker productivity and justify wages growing.

 
11/10/16

not trying to be snarky, legit curious. how much of those manufacturing jobs have actually left because of overseas outsourcing? I'm of the opinion that the manufacturing jobs that are available moved south because of lower regulation and better employment law (right to work states like south carolina), and most of the jobs were actually lost because of automation/robots/technology. is Trump refuting that with data? is he just of a different opinion? or is he chiefly saying that the issue is it's cheaper to trade with other countries and America needs to make itself competitive again?

if it's the last of those, I'd like to see an argument to support that thesis, because I always assumed that even with neutral currency effects, it's more expensive to trade with us because we have higher requirements for standard of living. you put American manufacturing workers in squalor like Chinese factory workers, we suddenly get more competitive. but if you want a guy to be able to afford a 3br house with running water, HVAC, and a pickup truck, suddenly we're not so competitive. I just have to think the economics don't work, but I'm willing to listen if I'm missing something.

 
11/10/16

What will happen to foreign nationals studying at US schools who have jobs / internship / FT offers at NYC investment banks? What can we do to plan ahead? I am afraid of losing my offer due to skilled worker visa changes, but then I see tweets like this and get confused.

https://mobile.twitter.com/realDonaldTrump/status/...

I appreciate any help/advice - thank you.

 
11/10/16
"nontargetmonkey96" wrote:

What will happen to foreign nationals studying at US schools who have jobs / internship / FT offers at NYC investment banks? What can we do to plan ahead? I am afraid of losing my offer due to skilled worker Visa changes, but then I see tweets like this and get confused.

I appreciate any help/advice - thank you.

You have absolutely nothing to worry about.

You aren't illegal. You are skilled. You aren't a criminal (afaik).

 
11/10/16

Given both parties are leftists and no party has any inclination to reduce the size of government, nothing will change. Taxes up, spending up, regulation up, debt up, unfunded liabilities up, individiual freedom down. If anybody disagrees I have ocean front property in Nebraska for sale.

 
11/10/16

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11/11/16
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11/11/16
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