Skip to main content

Inside the Market With an America under Trump, you better hedge your stock market risk

U.S. President Donald Trump delivers remarks at the beginning of a meeting with small business people, January 30, 2017 in Washington, DC.

Chip Somodevilla/Getty Images

I can't help but think of this phrase in Donald Trump's Inauguration address: "When America is united, America is totally unstoppable."

Yet, I have never seen the country this divided. Not ever. Which means, sadly, that America is stoppable.

I'm not saying we need a "consensus builder" – my favourite president, Teddy Roosevelt, did in fact coin the term "the bully pulpit" to describe the Oval Office. But we do need a uniter in the White House now, more than any time since the Civil War – not a divider.

Story continues below advertisement

For subscribers: Nine infrastructure stocks that can benefit from Donald Trump 

Rob Carrick: Hang on tight: Your finances will face dramatic Trump-led uncertainty

Opinion: Team Trump sets stage for another Wall Street meltdown

Many in the Republican camp will say "get over it, he won" – which is true – or say "stop talking politics, it influences your economic view."

Of course politics influences my economic view, since my concern is for a high-risk of policy mistakes. I have no doubt that trade/tariff policy is a lose-lose scenario for America and the world, and I have done the analysis.

The problem is that governments have done a poor job in smoothing the process and redistributing the income – and prospective policy continues to ignore these issues.

I strongly believe that we will look back at many (not all, but many) of Mr. Trump's policies as not moving the dial on the economy. And we will look back in four years and see a similar 2 per cent real GDP growth trend as we did under Barack Obama's tenure. (I adore optimists, but I am concerned that they put too much emphasis on the White House whereas there is no evidence that fiscal or regulatory policy have ever done much more than skew GDP growth by a few basis points here or there.)

Story continues below advertisement

Offsetting whatever "good stuff" there is in the policy plank is the heightened level of uncertainty.

The President is beginning where Barack Obama left off by governing the country with a dizzying array of executive orders – from the wall with Mexico, to pipeline expansion approvals, to health care, to funding cuts for so-called "sanctuary cities," to the North American free-trade Agreement and the Trans-Pacific Partnership, to restoring a ban on funding groups that provide abortions overseas, to a moratorium on visas from seven Muslim-majority countries.

Note that officials in most cities have vowed to challenge some of these moves in court. One quip, in particular, by South Carolina Senator Lindsey Graham was priceless: "Simply put, any policy proposal which drives up costs of Corona, tequila or Margarita is a big-time bad idea."

John Cornyn, a member of the Republican Senate leadership team, tweeted: "Many unanswered questions about proposed 'border adjustment' tax." Yeah, like how it will destroy the retail industry and severely crimp real spending power domestically while benefiting exporters. You have to go back to 1950 to find the last time the United States walked away from a negotiated trade treaty such as NAFTA, and the last time we had an Administration so protectionist was during Herbert Hoover's presidency.

The 1950s was sprinkled with three recessions and the 1930s represented the Great Depression – so we have lots to look forward to.

There is no deregulation or tax reform that will compensate for the anti-trade measures. Only with the passage of time will this become apparent to the legions of Trump cheerleaders out there. Recall that the last president to receive such a warm initial welcome from the stock market was Herbert Hoover. Few knew in 1928 that he would be a one-term president.

Story continues below advertisement

In any event, we have a divided nation on our hands and the situation is not getting better.

The President against the media. The President against the intelligence community. The President against Mexico and China. The President against globalization and global institutions. The President against his own party. The President against the elite and the establishment (even as he stuffs his cabinet with billionaires who likely haven't seen the inside of a subway in decades).

I get so many questions about how to model "animal spirits" in the GDP forecasts – how about trying to model unprecedented disunity? Mr. Trump was elected on an anti-trade, anti-immigration, anti-Mexico/China, anti-regulation, anti-establishment platform‎. And, so far, in short order, he is living up to his pledges. But the danger here, from a policy-mistake perspective, is that Mr. Trump gets easily distracted. Humiliating Mexico's leadership and openly questioning the popular vote in the election aren't the hallmarks of great leadership.

I can't be the only one thinking that something is wrong and that investors should be seeking out some hedges such as the CBOE volatility index, gold or anything that compensates for the ultra-high period of uncertainty we are in today.

David Rosenberg is chief economist with Gluskin Sheff + Associates Inc. and author of the daily economic newsletter Breakfast with Dave.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter