Overestimating Donald Trump’s impact on the financial markets might be more dangerous than underestimating him, according to speakers at CFA Society Vancouver’s annual forecast dinner.
The three panellists at the January 18 event at the Vancouver Convention Centre agreed on the uncertainty of the year ahead, but they said they’re not convinced that Trump is going to shake the world economy as many expect. They noted small but steady growth has been the hallmark of the U.S. and Canadian economy for the past few years and don’t expect much change in 2017.
Joe Sirdevan, founder of the Toronto-based Galibier Capital Management, said he expects the U.S. equity market to have a quiet year in 2017 and that Trump’s policies will be slow to take effect.
“He’s made a lot of promises, but they’re going to be hard to achieve in the short run,” Sirdevan said. “And for every action in economics there’s a counteraction, and so nothing is going to be that easy and nothing is going to be that immediate.”
Sirdevan said underneath Trump’s inflammatory rhetoric is what could turn out to be a moderate Republican president, economically speaking. He noted the Republican-held Congress wields more power than the president and will probably shoot down any of his more drastic economic policy measures.
“[Trump’s] pro-business, so certainly for example bringing the offshore money home would be a good thing, in a tax-beneficial way. It would certainly spur investment in the U.S. Not all his ideas are crazy; what’s crazy is his flip-flopping. So if he starts to stabilize, I think it could be beneficial for the U.S. economy.”
Jason Trennert, a managing partner and chief investment strategist for New York-based Strategas Research Partners LLC, noted the S&P 500 has rallied since Trump’s election, posting its biggest inauguration-to-election gain since Bill Clinton’s second term in 1996.
“From a market point of view, if you look at it rationally and took away all the rhetoric and all the outrageous things that Trump said, and just looked at the policies, generally speaking, it’s not hard to understand … why stocks have gone up.”
Trennert added that, contrary to popular opinion, the sectors that will be influenced the most by Trump will be energy and finance, not manufacturing.
“With trade the hope is that the bark is worse than the bite,” he said. “And if it’s not, if it really does bite, then the market will respond accordingly.”
Helima Croft, New York-based managing director and global head of commodity strategy at RBC Capital Markets, said Trump won’t even be the key player when it comes to the oil and gas market in 2017. Croft noted that the bigger story is the recently signed Organization of the Petroleum Exporting Countries (OPEC) agreement to cut supply for the first time in eight years.
“A lot of our forecasts [are] rebalancing the oil market and sticking the landing with OPEC,” said Croft. “And … yes, we are anticipating U.S. production to go up, but Saudi Arabia calling an end to the market-share strategy is huge, and now they’re essentially in where whatever it takes to make US$50 [per barrel] work.”
