President Trump

In the words of Bob Dylan, ‘the times, they are a changing’

Sitting through Donald Trump’s speech after the results of the Indiana Primary, which saw the withdrawal of Ted Cruz (who, like someone else, also has eyes like Caligula) and the triumph of Donald Trump himself, I pondered how the world had changed and what that might or might not mean for markets. We no longer seem to have a predictable cycle in politics; instead we have a new and unpredictable trend. The old safe assumptions of hitherto can no longer be safely made. People now even question whether the Republican GOP will continue to survive a new tide of right of centre populist sentiment. Will Donald Trump do for the Republican party what Jeremy Corbyn has done for the Labour party in the UK? Despite the fact that in the gold carats measurement of doctrinal purity (but not in the politics itself) Mr Corbyn has more in common with Ted Cruz than Mr Trump.

More generally, the extent to which politicians in most places have fallen into the deep, black, strongly flowing waters of public distain is worrying. As is the fact is that contenders for office may be popular precisely because they are not politicians. If voters do not want to vote for a politician, what do they want?

When the people lose faith in their political representatives what is there to replace them? Dictators and tyrants is a traditional answer. Is that the possible long-term significance of Donald Trump? Will he, like Rome’s first emperor Augustus, be the man of destiny that ends America’s Republic – just as Augustus ended the Republic of Rome? The founding fathers of course designed the Constitution of the United States precisely to avoid such an event. And much would depend on the political nature and temperament of the next Congress.

All this of course assumes that Donald Trump will win the Presidency. But the papers are full of reasons why that cannot happen. A year ago, Mr Trump was perceived as having as much chance of becoming the Republican candidate as Leicester City had of winning the League. The ‘blindingly obvious’ is, I am afraid, no longer blindingly obvious. Because Mr Trump should not in theory have won the candidacy of the Republican Party by primary election, we cannot rule him out, as a matter of common sense, from becoming the President of the USA. We live in exciting times!

Donald Trump is a salesman, not a policy-led politician. He is a glory seeker, emitting vacuous calls to make America ‘great again’. In particular, I note the ad lib endorsement he gave to his son-in-law (another real estate man) on the stage, as being really “great” at politics; was he, already in the private ambition of his mind’s eye, thinking of his daughter’s husband as his family successor? Had the mind of Trump already assumed that the Presidency is his for the taking and does it now contemplate more permanent greatness for himself and of course his Nation? Does he aspire to style himself the first Emperor of the United States? I have no doubt that Donald would regard that as another ‘great’ idea. If politicians are too craven and too unprincipled to do the job, then a man of destiny is clearly required – the man who will “make America great again” – in what is clearly a criticism of politicians and politics and the democratic system that produced them.

Putting this indulgent prophesying to one side, what are the policies of Donald Trump and what do they imply for markets and investors if he were elected President of the US?

The problem is that Mr Trump has no settled or well thought through policies. If he were elected President on a tide of naive euphoria of ill judged hopes, there is a danger that he could prove a devastating failure, leading to even more cynicism and disillusionment in the US.

That would prove a difficult situation for a man who likes to win. He would doubtless blame any such failure or disappointment on others – most particularly, the system and those pesky politicians. He is just the man to exploit such an outcome to his ultimate competitive advantage. The Republican Party could then become the Trump National Greatness Salvation Party.

Returning to the ‘here and now’, what has he promised? As part of making America “great again”, he promises to put all unemployed US coal miners back to work, evidently side-stepping scientific predictions of a disastrous, hydrocarbon induced climate change. If the scientists are right and Donald gambles against that reality, then cash will be infinitely preferable, longer term, to equities because they will prove dangerous in a climatically/economically unpredictable world.  While US coal stocks rally short term, it might be worth lightening one’s holding of natural catastrophe insurance shares in the long term.

He has also promised to scrap the North American Trade and Investment Treaty to  strongly protect US blue collared ‘rust belt jobs’, strongly hinting at raised US tariffs and other barriers against international competitors. This is a clear warning shot to all international trading companies – particularly, one supposes, those planning to grow by gaining market share in China.

He has also talked of building up the US military with a hint of more wars in a demonstration of the ‘greatness’ of the United States and, no doubt, President Trump. One supposes that he will not understand that such a policy in the Middles East will prove a great recruiting call for young western Muslims to extremist groups like ISIS. Defence stocks should do well.

And of course there is that policy to build that wall across the continent of America to keep out interloping Mexicans. This truly imperial task will be great for cement and construction shares, though they will probably have to recruit more foreign workers to complete it just as the Chinese were recruited in the nineteenth century to the Pacific railway – particularly if more young Americans are recruited into the US military. President Trump’s gigantic neo-Keynesian ‘shovel ready’ task should, in theory, be great for US cement and construction shares. As they will come to say, no doubt, “making US cement shares great again!”

As you might guess, my hope is that the truly fantastic (as in ‘fantasy’) Donald Trump does not make it to the White House to become Commander in Chief, for all sorts of reasons. However, as we already know from the fate of all his rival Republican candidates in the recent primaries, the word ‘impossibility’ is not off the presidential agenda, particularly given the fact that Hilary Clinton is a professional politician and, partly as a consequence, not greatly trusted. So we should at least prepare ourselves for the possibility of a helter-skelter ride into a brave new world of uncertainty.

There are many sound reasons for thinking that Donald Trump will not get to Pennsylvania Avenue. But those reasons are linked to a science of political mechanics that have proved unpredictable. The West seems to be making one of those big epoch changes that bring discontinuity. That is not a wholly established fact but a factually based probability – a probability that we should keep in mind over the coming months.