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A doer who not only deals with issues but also concludes them and has the ability to win others over to his cause. In short: one with a clear plan for how to make America great again. He has promised many things during this time: to build a wall to Mexico, to introduce a Muslim travel ban to the U.S., to repeal the healthcare law known as Obamacare, to implement a big tax reform and to embrace massive infrastructure investments. Beside his voters, it were in particular the international financial markets that believed the myth of the deal-maker. Since his election, the S&P 500 rose at its peak by 15% and the Russel 2000 even increased by 22%. However, Trump’s image as a deal-maker has been taking a hit for several weeks now.
Trump reaches his limits
First, he failed on two occasions in the battle over the Muslim travel ban. He passed it by decree without seeking congressional approval, but his initiative has been blocked both times by the courts. Also building the wall to Mexico will be much more expensive than anticipated, but will for now be paid by the Americans. At the end of last week, the next showdown followed – the repeal and replacement of the Obamacare, of which he would not get tired of calling it a disaster. This time it were not the courts that stopped him, but his own party. Too much resistance came from within his own ranks – while for some the new law was not radical enough, for the moderate wing of the Republicans it was too much. Trump seems to have lost his shine within the first two months of his presidency and the markets react nervously. Meanwhile, the S&P 500 lost more than 3% in value. The market starts doubting whether Trump can manage it to push through his plans, especially as no details have been presented so far of how he wants to finance this reform. If you take a closer look at how poorly prepared and premature the draft laws submitted by the Trump administration have been so far, then those doubts are in my opinion justified.
Should Trump fail again, a stock market crash will follow
If Trump‘s tax reform also fails, we will see a slide in the stock market. In such a case, the markets would not only reach levels from the period prior to the elections but they would even fall below those levels. A president incapable of governing would deteriorate the overall situation significantly.
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