Peak Trump Reached?

(Emma) #1

Interesting article in the Finanicial Times about the potential of the Mid Term elections to negatively impact the US markets. Not sure how this would affect the rest of the world, thoughts?

Google ‘Have the markets fallen out of love with Donald Trump?’ To avoid the paywall

(Vladislav Kozub) #2

Not quite market related, but I have seen somewhere that any incumbent house-controlling party (currently republicans) has lost the midterms in 34 cases out of 37 since the independence.

In terms of the impact, democrats, being a shadow cabinet (if this term even works for the US), will supposedly act as populists (anti-big companies agenda seems to be prevalent in the US) and block as much as they can when it comes to Trump’s initiatives. Interestingly, his administration has only recently repealed Obama’s ban on JPM’s growth even within the US. This bank could not expand its branches to other states (it is only represented in 20) for years and now plans to establish branches in additional 23 since the restrictions are lifted.

Similar moves are common for smaller corporations too but we are likely unaware due to their insignificance. Tax reform has also given big lump sums for the internationally operating businesses who now have motivation to repatriate their cash and boost their growth further.

The problem with democrats is that they are pro-regulations and pro-restrictions for businesses. If they win midterms, it is prudent to presume the market will react negatively and the corrections will continue.

But this is only my personal assumption.

(Emma) #3

The JP Morgan thing was a punishment until they got themselves sorted out after shoddy practices leading up to the crash. I wouldn’t say the Democrats are anti big business, they just don’t operate the same laissez fair or excessively favourable pro business policies that the republicans do. Rather than the trickle down effect they take a more proactive distribution

(Vladislav Kozub) #4

Apologies, I did not mean to say anti-business but pro-restrictions and pro-regulations (anti-big companies agenda is from the general consumers’ perspective, not the parties’).

And whilst banks were absolutely not diligent unlike now, it was up to the consenting adults to agree to whatever lending terms were on offer back then - I doubt they were forced to by the banks. I really don’t want to be that guy, but consumers’ financial illiteracy in the years leading to 2008 has partly been the cause of the crisis. That said, it has definitely impacted the now-adults to be more careful and considerate with their financial decisions - a great lesson at a great cost.

On a different note, I don’t think rapid expansion of a bank’s presence in a country can in any shape or form be a crisis catalyst. Just like there is Barclays’ and Lloyds’ presence in every corner of the UK, it per se can bring no harm to the consumers.

(Alex Sherwood) #5

The Big Short does a pretty good (if overdramatic, of course) job of showing what the situation was like at the time.

(Emma) #6

Not a catalyst no, but by not allowing them to expand it hurts their ego. A lot more important to them than financial penalties.

Friend of mine bought a house just before the crash. Mortgage broker said she wasn’t earning enough so put her down as a part time employee of theirs to make sure she could get a mortgage. She didn’t understand the effect of interest rate rises so had to go bankrupt. Even a quick check by the bank would have figured it out :woman_shrugging:
People need to be able to trust all the links in the chain to explain and do the best for them

(Vladislav Kozub) #7

I am sorry for your friend and hope she is in a better position now.

This is absolutely true, which makes current state of mortgaging much more robust and safe for both lenders and borrowers. Hopefully the existing lending regulations will never revert back to the pre-2008 levels :slight_smile:

(Emma) #8

Yeah, she’s good, was just using a real world example to illustrate a point about the institutional failings.

Back to the article. If the American market drops as they are suggesting, what would the impact be on the rest of the world? Have the markets already taken into account the possibility of the mid terms?

(Alex Sherwood) #9

Politics aside, it’s interesting to see the markets reacting positively to democrats regaining some power over the republicans -

(Vladislav Kozub) #10

Interestingly, I looked at some historic data and the market always tends go up with a divided parliament. Effectively, none of the parties can do any sharp moves or legislative changes. Such certainty is something investors enjoy a lot.

(Kenny Grant) #11

I think there’s a lot of drama still to come as Trump desperately tries to avoid investigation. The next few months are going to be interesting.

Trump can do a lot without legislative approval, because he does not respect the norms which check presidential power. I fully expect war (doesn’t matter who with) if he fears for his position.

(Vladislav Kozub) #12

Upon losing the House, the republicans will now fiercely defend Trump because they no longer have the luxury of controlling the parliament. Whilst his party is no longer able to proceed with all initiatives they planned (forget repealing Obamacare now), they still will block any impeachment attempts, investigation on Russian involvement in the elections or even his tax returns reassessment. And they still have a full control of appointing the cabinet staff thanks to the Senate’s majority.

I’d say Trump’s individual position has very much strengthened with these elections. Probably it even is the best outcome for him.

(Jeff puckering) #13

He also gets to blame the increasingly likely market normalisation/bubble/crash on the democrats, as well as any other failed policies as they will be accused of ‘meddling’. So yea I agree I think he will have a safe 2 years and his voter base won’t bat an eyelid, if anything it will be a chance to grow the hate for the opposition more