The Trump Trade - Where’s the Beef?

Since the presidential election and victory by Donald Trump, the U.S. equities markets have been on a rampage. This has resulted in setting forth one of the most dynamic rallies in American history. Soaring to new record values and all-time highs, this most recent equities rally has been predicated on the belief that this new administration would be transformational.

Transformational by implementing a significant tax cut. Transformational by initiating massive infrastructure projects to rebuild our roads and bridges. Transformational by executing these pledges and new initiatives to revitalize the American economy and grow our annual GDP to 3% and above.

These actions, it has been believed, would bring about a profound explosion of prosperity for the American people. Moving these promises into action, and the potential results they could produce, has been one of the primary driving forces pushing U.S. equities to all-time highs.

The inability of this current administration and Republicans to put forth a viable “replace” component to their repeal and replace Obamacare agenda raised serious concerns as to whether this administration could deliver its campaign promises.

However healthcare reform is only one pillar of the multifaceted approach this administration had laid out. Even with its failure, the Trump rally continued as there was still optimism regarding tax reform and infrastructure projects.

Recent events have brought into question whether this administration can deliver on its campaign promises. These doubts and concerns, which have been present from the onset of the Trump administration, seem to have magnified this week and come to a critical fork in the road.

Comments made this week by the president about the violent protests in Charlottesville Virginia have been considered incendiary by many. This resulted in major political fallout and chaos for the current administration, which led to the disbanding of his advisory councils as well as the strategic and policy forum. Collectively, these events have further alienated the president and lessened his support, even with his Republican constituents.

This magnifies the question that many analysts and market participants have asked: Can this administration deliver any of its campaign promises and pledges?

In an interview with CNBC, Peter Boockvar, chief market analyst at the Lindsey Group, said, "For the first time, people are now questioning if he can get anything done policy-wise. His agenda is under threat.”

Yesterday Senator Bob Corker said that President Donald Trump had not shown the stability or competence he needs to be successful. This week business people, as well as politicians on both side of the political fence, have questioned whether Trump can complete his pro-growth initiatives and programs.

Which brings us to September and specific issues Congress will have to face: Raising the debt ceiling while continuing to try to reform the current tax structure with major cuts.

This dilemma was brought to the forefront by Alec Phillips, an economist at Goldman Sachs. He said, “The odds of a government shutdown are "fairly high" because Democratic support for the spending bill will be required, which will then force the Republicans in Congress to make some difficult concessions.” Although he still believes that the tax cut is slightly more likely than not, his conviction is low. "If tangible progress has not been made by October after these fiscal deadlines have passed, tax legislation will start to look less likely, in our view."

In other words, many analysts, market participants, investors, and U.S. citizens are asking themselves a simple question regarding the transformational changes that Donald Trump promised during his campaign - “Where’s the Beef?”

Wishing you as always, good trading,