Donald Trump never really won the love of the Grand Old Party.
He simply kept bringing in lots of rather raffish voters who felt abandoned by the Democrats, who had become infatuated with political correctness. These new "Republicans" love Trump because he is the most politically incorrect candidate of our times.
When he achieved The Impossible Dream of defeating Hillary Clinton while promising protectionism in trade, an infrastructure boom, and a scale-back on global warming programs, he instantly captivated the capital markets. U.S. stocks soared to record peaks, and the greenback was once again the global standard of value. Goldman Sachs, which had given Hillary 98 per cent of its campaign contributions, led the Street in predicting a strong economic recovery and called for new stock market highs. And so it was to be. Mr. Trump was just the tonic a high-earnings ratio stock market needed in a low-speed economy. The multiple went to its second highest ever (after the runaway insanity of the tech bubble in 2000).
Mr. Trump and the Street assumed that the GOP politicians on Capitol Hill would do what was needed to make his bold program work. First was to be the abolition of Obamacare, to be replaced by a huge Republican program that would give everybody better health care at lower cost. That had to be the first big bill, so the budget, which could not be balanced until the economy responded to his ministrations, could be passed.
Getting enough votes in the House and Senate for a health care program to replace the 70,000 pages of text and regulations of Obamacare would have been a problem under any circumstances. But Mr. Trump has been losing his support in the polls and with Republican politicians by continuing to Tweet — particularly in the wee hours. This had worked for him in the campaign, but it has been seen by most senators and congressmen as unseemly for the White House. Republicans are rather more concerned with traditions and politeness than Democrats. Congressmen and senators kept hearing from their voters that they wanted him to act like a real president. He insisted that it was His Way.
Then he made The Step Too Far. He tweeted that President Obama had spied on him and his close associates — even after he had won the election. If true, Mr. Obama would have to have obtained a court approval to spy on an American. And there had been no request. If he had somehow gone ahead and spied on Trump without a legal waiver, this would be a crime so serious that it is punishable by imprisonment. That such a popular president — and a lawyer at that — would commit such an offense is beyond belief.
Naturally, that enormity sent Mr. Trump's poll scores plunging, and infuriated many Republican lawmakers, as they began hearing about a possible Nixon-style impeachment from the folks back home — and in nearly all the leading newspapers.
FBI Director James Comey swiftly rejected Mr. Trump's accusation. But, as with the entire Trump saga, there was yet another twist in this bizarre tale.
As the health care legislation was heading for a vote, Devin Nunes, the Chairman of the House Intelligence Committee startled Congress and the media when he announced he had received information that tended to support the president's claim. His credibility was impaired because he told the president and the press, but neglected to inform his committee members — an astonishing breach of the rules.
As this is written, the House prepares for a vote. It will be close. But even if it passes, the Bill must pass the Senate. Some loud, leading Republican Senators have announced they would reject the bill as written, so it will be amended. If it manages to squeak through, it will come back to the House.
Meanwhile, the Trump Presidency keeps losing ground. Democrats keep refusing to approve high-level appointments so the Cabinet members who finally squeaked through the approval process are having real trouble doing their jobs.
The stock market had its first 1-per-cent drop on Tuesday, as word of a wipe-out for health care legislation spread. It is rallying modestly today, helped also by the possibility that Mr. Trump will win on the allegation of personal spying. But the commodity markets other than gold — the ones that soared after Mr. Trump won — are sliding — most notably oil.
Investors should not assume that Mr. Trump will continue to triumph. His Mexican wall is too ambitious and too costly; his border tax legislation would be devastating to Canada, Mexico, China and other major trading partners. As long as he was a mischievous novelty amid a shopworn group of presidential candidates, he looked like a winner.
If he is now seen as a president who has little common sense, and no chance of getting his programs passed by Congress, then investors will begin to ponder why they are holding stocks priced for perfection in an imperfect economy, with an imperfect president, an imperfect Congress — and some powerful foreign enemies and rivals itching to take advantage of American weakness.
We have consistently argued that investors should bet on a Trump success story, because so many of his proposals make such great sense — such as his scale-back on costly global warming programs, and his attacks on political correctness excesses. We remain impressed with his cabinet, which makes the Obama roster look dull, stale and flat.
But the Democratic Party remains a formidable force, and is still backed by the overwhelming majority of the media. Moreover, the hatred of Mr. Trump is so intense that it is problematic to endorse him in many circles, whereas the respect for him tends to be cautious or simply an assertion that "I couldn't stand Hillary."
We believe investors should move some cash into mid-term bonds, scale back overall equity exposure, and increase exposure to gold and silver miners.
Mr. Trump has shown, during his long campaign, that he could keep coming back. The Democrats only dominate in the media and the universities — but that combination can be potent. Given the Democrats' lackluster leadership in Congress and even in statehouses across the land, he has no charming, smart and experienced challenger to scare him — or the Republican Party. He has little to fear except his own missteps and misTweets.
If he wins on health care in the House and the Senate, and if the evidence on wire-tapping by Democrats turns out to be something more than his own paranoia, then the Trump success story will be back — in force.
A P/E ratio of 20 on U.S. stocks is more than a tad high for the reliability of that outcome.
Wait for it.
Don't bet big on it.
Don Coxe is chairman of Coxe Advisors LLC