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Trump’s first 100 days: equity markets push on despite lack of policy progress

Donald Trump failed to complete most of his major campaign promises during his first 100 days as US president, and geopolitical tensions ramped up, but that hasn’t stopped equity markets pushing on to new record highs.

US flag
Source: Bloomberg

Politics and markets aren’t co-dependent. The latter for the most part ignores the former, only reacting when there’s a very clear and present danger to the investment case of the day. Since Donald Trump became the 45 president of the US, markets have largely ignored his lack of progress on a multitude of policy fronts, instead focussing on his promise to push through a huge investment programme and tax reform. It became widely known as the Trump trade, and was cited as a key factor in driving many global stock indices to new all-time highs.

Trump’s first 100 days as US President were eventful, that’s for sure. He’s taken the same straight-talking, twitter-driven, fire-from-the-hip style that marked his presidential campaign. From accusing his predecessor, Barack Obama, of wiretapping Trump Tower to his continual refusal to publish any tax returns. He’s anything but conventional.

But he has so far failed to deliver on many of his campaign promises. The wall between the US and Mexico? No progress. Replacing Obamacare? Not yet. Immigration bans? Blocked by the courts.

In other areas there has been more progress. Take foreign policy. Far from pulling up the drawbridge and looking internally, Trump took decisive action over the use of chemical weapons in Syria, and has taken bold steps to take on the regime in North Korea, even if that has resulted in a big increase in regional tensions.

More importantly, the areas in which Trump has perhaps made most progress have been the most business-friendly areas. He used his executive powers to push ahead with the Keystone XL and Dakota Access pipelines, and met his pledge to take a knife to small business regulation.

Still, there’s little progress on his big tax reduction pledges and, while Trump has pledged a $1 trillion infrastructure spending bill, there are plenty of budget battles with Congress ahead. The US may also come to rue the president’s decisions to pull out of the Trans-Pacific Partnership (TPP) and start to renegotiate the North American Free Trade Agreement (NAFTA).  

This lack of progress on key campaign pledges has been ignored by the markets. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite have all hit new all-time highs. Trump of course has jumped on this, saying this was a sign his policies are already working.

Here’s the S&P 500’s progress:

S&P 500 progress - first 100 days of Trump as president

However, to put this down to Trump and the ‘Trump trade’ would be disingenuous. It merely marks the latest phase of a bull run that’s been in place since 2009. The bulk of the rally took place under the Obama presidency.

S&P 500 progress - before Trump presidency

In fact, 100 days is far too short a time to judge Trump on his economic policies. Under Obama, the US economy added 11.3 million jobs, numbers Trump has called ‘phony.’ The new president says he’s going to add 25 million jobs over ten years.

The bull run in the equity markets could continue for some time yet, with or without much more progress by Trump. Certainly, progress on the promised infrastructure spending and tax plans would help support confidence in stock markets, but it seems that markets are more focused on the health of the overall US economy and hiring by companies than individual Trump policies.

The forex markets, meanwhile, are currently focussed on the US Federal Reserve and the pace at which it will raise interest rates rather than on the president’s policies. 

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