Yahoo Finance 
Listen carefully to Trump’s speech
What a week this has been, waiting for Donald to become President. After two and half months of high expectations, we’ve seen our stock market put on 12%. However, during this week, apprehension crept in and the market has fallen, while we wait to see if good Donald or bad Donald shows up at his inauguration speech.
In all likelihood, good Donald will take stocks higher. Bad Donald could easily undo a lot of the impressive rally that has followed his election victory.
Also read: ISIS Has a Brand New Weapon — and You Can Buy It at Amazon
The good Donald story
Good Donald talks tax cuts, infrastructure spending and less financial regulation and stock markets head up.
The bad Donald tale
Bad Donald wants to bring China to book on trade matters. And this week, he even talked about a 35% tariff on German cars, if they want to make them in Mexico.
How real is it?
This kind of trade bullying worries some market players. While some argue it’s Donald playing hardball before negotiations, there are others who fear he’ll go too far and spark a trade war.
And there are other fears.
The man who spreads fear
Nouriel Roubini isn’t a household name but as a highly respected US-based economist, he gained fame tipping the GFC crash was imminent. Like a lot of forecasters, he hasn’t gained infamy by remaining too negative too long after the GFC. I watched this guy because he’s no dope. However, after the GFC, if you’d taken him seriously, you could’ve been too cautious when stock markets, especially in the USA, have risen over 200%!
What’s Nouriel up to now?
Nouriel is again negative and it’s Trump’s inconsistent policy mix that worries him.
To be fair, he did tell CNBC in Davos that “the market is going higher”, which will make us richer, at least via our super funds. However, he argues that lower taxes and more government spending will lead to inflation, higher interest rates and a stronger dollar, which could mean a lower Oz dollar. (That would be good for growth here but makes us poorer when we holiday overseas. I guess you can’t always get everything you want.)
What’s the end result?
This process will hurt US manufacturing and Trump’s job creation goals, with Nouriel tipping 40,000 jobs to be lost in 18 months.
And now for the good news
But it’s not all bad news on Donald.
Jamie Dimon is also ‘enduring’ the beauty of Davos, being the CEO of JPMorgan Chase. He thinks if Trump’s tax plans happen, US economic growth could be in the 3-4% band!
And as the CNBC headline heralded: “If you like the Trump rally so far, just wait…” It’s a little like the famous warning from former US President, Ronald Reagan, when he said: “You ain’t seen nothing yet!”
Dimon says “everything looks to be pretty good” and his growth outlook comes with his belief that jobs are increasing, wages are rising and companies being long on cash, while capital markets are happy to let others have their money.
Of course, you could argue Jamie is talking his own book, with his company’s shares up 20% since the election and rising interest rates will also be good for all banks’ bottom lines. However, what he’s describing ahead is what we’ve missed since the GFC.
Also read: Bega bites on Vegemite and cheese combo
Maybe Donald will be good
Like him or loathe him, Trump with unusual policies and a unique approach to politics, looks like the abnormal politician who might help the US economy embrace what a normal economy looked like before we had a near-death or near-Great Depression experience with the GFC in 2008!
Before then, normal economies grew and we had inflation, falling unemployment and rising interest rates. People, as well as business leaders, felt wealthy and were prepared to buy/invest in stuff.
The US has started to look like this in recent years but central banks were doing all the heavy lifting, with crazily low interest rates — even negative rates!
Crazy times need crazy actions, sometimes
These were crazy times and maybe we needed someone completely outside the square to give the US and the world economy the electric shock treatment we just might need.
I can’t believe I’m writing this as an economist but when I taught economics at the University of New South Wales, we never thought about the post-GFC malaise we’ve lived through, where interest rates were actually negative.
Listen to Trump’s speech!
If Trump can get away with a number of his policies: tax cuts, infrastructure spending and more sensible regulation of banks rather than excessive control, then stock markets will rise for at least the next two years and we will be richer.
However, if in his inauguration speech, Trump sounds like a man on a mission — and a mad one to boot — then markets might reassess their pro-Trump stance and we could kiss a lot of this great rally since November 8 goodbye. I’m hoping Donald Trump and his team aren’t that silly!
Peter Switzer is the founder of the Switzer Super Report, a newsletter and website for self-managed super funds.
