The results of last night’s election are no doubt worthy of an Economic Update.
As I shared my initial thoughts with others on Facebook last night – the possible reason behind the Trump surprise and the likely impact on the financial markets today – I found it far easier to re-post what I had written about #Brexit in an Economic Update last June.
The parallels between that vote in Great Britain and yesterday’s vote in the United States are uncanny. And I believe the outcome this time around will be quite similar. After an initial swoon, all markets, including Great Britain’s, are considerably higher.
Rather than rewriting what was already a somewhat prophetic piece, I thought I’d share it again exactly as written and let you judge the parallelism between the events. Just substitute Trump for Brexit and perhaps the Indians in the World Series for the CAVS in the NBA playoffs. (Sure, the Tribe didn’t win, but I heard the Cubs did have a nice little parade in downtown Chicago.)
While no situations perfectly rhyme, I think any initial pain in the financial markets will quickly be forgotten, just as it was with Brexit. The people selling are largely position traders, holding around the outcome of a binary event like yesterday’s election rather than investors hoping for a stream of earnings over many years.
Donald Trump was gracious and humble with his victory speech suggesting – let’s hope – that he will govern in a far less combative fashion than he and Hillary both campaigned. While slower for longer remains our core belief, there is no doubt that corporate tax reform, changes to the Affordable Care Act, and fiscal stimulus are now far more likely given the retention of the majority in Congress.
While many of the Trump administrations policy issues remain unknown and a work in progress, at the margin the news is undoubtedly positive for the politically despised health care sector as well as industrial names potentially levered to a pick up in fiscal spending –especially defense.
