The new president and his policies
With such a convoluted political system at play in the US, the importance of the president to the financial markets shouldn’t be overstated.
For all Trump’s campaign trail bravado, any legislation of concern to traders will have to jump through a number of hoops before it risks disrupting the markets. So even if his candidacy is treated as doomsday in the media, don’t be surprised if markets emerge a little more resolute.
Still, it’s clear to see why Trump’s victory will likely have a more pronounced effect on the markets than other presidents in recent memory. As such, taking stock of his policies gives us a better chance of anticipating what impact they may have further down the line.
The number of income tax brackets will fall from seven to four, with rates for those in the higher brackets reduced, and abolished entirely for the lowest earners. Corporate taxes will be scaled down by half, though certain exemptions that are currently available will disappear.
Costs such as social security, Medicare and military defence will remain untouched, but certain domestic programmes will be dissolved, notably those associated with the Department of Education and the Environmental Protection Agency.
Free trade agreements NAFTA and the Trans-Pacific Partnership will be renegotiated or dismantled. Far more stringent tariffs will be exerted upon Mexico and China unless they comply with Trump’s terms, with a view to boosting domestic manufacturing.
Trump intends to defer the question of minimum wage to state governments. Overall wages will benefit from an economic plan he claims encourages overall growth.
A number of financial reforms implemented by Obama will be annulled, including and primarily Dodd-Frank, a regulatory law which forces banks to reduce their reliance on debt for funding.