6 June 2020
1300 794 893

Has Wall St taught Trump a lesson?

Peter Switzer
31 January 2017

Has Donald Trump tripped up with his so-called Muslim ban? Wall Street says yes, with the Dow down over 180 points when I bounded out of bed at 5:30 am!

CNBC was showing a phone call with a female Iranian scientist, who was scheduled to take up a job in Boston, whose visa was meaningless under the new executive orders. 

Tom Switzer (no relation) from the United States Studies Centre at Sydney University who was on my TV show last night is a right-wing commentator on the ABC Radio National channel but no big fan of Donald Trump. He made the point that this isn’t a complete Muslim ban. Trump is targeting anyone from those seven Muslim countries where terrorism and anti-American activity exists.

However, to Wall Street influencers, this represents uncertainty and means the more short-term trader now is worried about their profits, which were largely Trump-assisted since the November 8 election.

My column yesterday was hopeful of the Donald Trump we saw on the weekend, bowing to the wisdom of his Defence Secretary, James ‘Mad Dog’ Mattis, who opposed torture, unlike his President!

This showed Donald as a compromiser and gave me hope that the collective wisdom of his advisers and the potential power of Congress would encourage the President to largely come up with smarter decisions than some of his vote-winning promises.

His ‘Muslim ban’ worries me a little and ditto for Wall Street.

I’m hoping the reaction on stock prices will help decisions out of the White House get smarter and, hopefully, wiser. What we’re looking at is the worst day for stocks since the election!

How does that happen?

Robert Pavlik, chief market strategist at Boston Private Wealth, summed it up neatly for Reuters.

"The market is reacting negatively right now because of the uncertainty that it creates,” he said. "If it can pull more Republicans off of the President's following and maybe weaken his strength in Congress, then you start to wonder about the other initiatives that may not get passed."

This isn’t the only uncertainty the new President has created. Chinese and Mexican companies are already pondering the implications of his potential policies but it’s not just foreign businesses, with local US companies potentially penalized for anti-American tax or commercial strategies!

A telling statistic is that the Dow has put on over 9% since the election but only 1% since the inauguration! Now on one level, the 9% gain was extraordinary. In fact, I’ve been telling my followers that I thought a pullback was on the cards because of the rapid rise in stock markets, so this is the process.

The course of stocks is in Donald Trump’s court. You have to hope he learns his lesson well and fast but I have my doubts and so do the smarties who trade stocks for their wealth. If you were them, wouldn’t you take profit and wait for the uptrend to look more convincing?

If you want to see the more immediate reason for the stocks sell-off, then just understand that the airlines were the first to be pummeled by the market. As Reuters pointed out: “Airline stocks, including American Airlines, United Continental and JetBlue, were down between 2.5% and 5.5%.”

What Mr Trump has to manage is his potential to spook Wall Street with unwise decisions against an economic environment that continues to make stock buyers buy.

This summed up another Reuters story that’s highly relevant to anyone hoping to make money out of stocks:

“U.S. consumer spending accelerated in December as households bought motor vehicles and cold weather boosted demand for utilities amid a rise in wages, pointing to sustained domestic demand that could spur economic growth in early 2017.”

Consumer spending is responsible for roughly 66.6% of what the US grows by and in December it spiked 0.5% after a 0.2% rise in the previous month. The rise was the best in three months, which I suspect has a bit of good old boy Trump confidence explaining it!

The Administration needs to play this ban outrage showing Trump being wise, without looking like he’s backing down completely.

Fairfax newspapers had about 20 stories on Trump yesterday and he’s the best story in town for the media but I hope he learns from his mistakes and becomes less newsworthy for the sake of the global economy, world peace and my stocks portfolio!

Pick up a copy of Peter Switzer's book Join the Rich Club from the Switzer Store today.

Get the latest financial, business, and political expert commentary delivered to your inbox.

When you sign up, we will never give away or sell or barter or trade your email address.

And you can unsubscribe at any time!
1300 794 893
© 2006-2020 Switzer. All Rights Reserved
homephoneenvelopedollargraduation-cap linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram