Five things I’ve learnt from the Trump win – Nomura
Bilal Hafeez, Research Analyst at Nomura, suggests that the dust is only just settling after the Trump win in the recently concluded US presidential elections, but mentioned below are the early lessons.
Key Quotes
“1. Trump was the heir to the Obama way, not Clinton. With all the talk of anti-establishment candidates, we must not forget that Obama was just such a candidate in 2008. He had limited political experience, especially compared to the Republican Party’s John McCain and he had earlier defeated Hillary Clinton in the Democratic primaries. What helped him was the credibility he had built by his frank autobiography (Dreams From My Father) and his use of social media to galvanise his base outside the conventional Democratic machine. Similarly, Donald Trump built up his deal-making image during 14 seasons of the reality show The Apprentice and he came with little political baggage. Hillary Clinton, meanwhile, was as establishment as you could get and relied on the traditional campaigning techniques with social media bolted on. Pollsters yet again missed this new dynamic in politics.”
“2. Brexit was the wrong reference for US election night. Despite everyone expecting a Clinton victory, most were wary of a Brexit outcome. With markets selling off as Trump’s chances rose on election night, it looked like the Brexit playbook was working. But markets are never that kind. Instead, they quickly focused on the Republican clean sweep of President, House and Senate, which would allow Republicans full control of the budget. This in turn resulted in the market focusing on an expected fiscal stimulus in the US, which is risk-positive.”
“3. Paul Ryan matters. For all the political contortions House Speaker Paul Ryan had to make during the Trump campaign, his relationship with Trump could provide the most volatility to markets. Specifically, his budget proposal is the currently accepted Republican budget. With control of the executive and legislature, the Republicans can now pass that budget. The twist is that while it contains tax cuts as Trump has talked about, it contains little on increased spending on infrastructure. In fact, it projects scaling back on spending, especially around healthcare. This tension will likely be monitored closely by markets.”
“4. The euro area is the next victim of de-globalisation. We are seeing a backlash against broader globalisation, whether it’s the presence of foreign companies or foreign workers in countries, or the loss of sovereignty due to international treaties. Clearly, Brexit was the first big example of this in 2016, now Trump is the second. The obvious next case is the euro area – it is the biggest free trade area in the world and features all the dimensions of globalisation that are seeing a backlash. Moreover, the political calendar is heavy over the next 12months providing opportunities for the backlash to be felt, whether in the Italian referendum and Austrian presidential election next month, or the Dutch, French and German elections next year.”
“5. Watch reality TV, not TED talks. For all the surprise of Trump’s victory, if one had watched him on The Apprentice, it may have not have come as such a shock. Indeed, reality TV, YouTube channels and social media are allowing individuals to gain credibility that other means do not allow. Moreover, they capture grass-roots angst better. The contrast with the well-packaged and well-rehearsed productions like TED talks is only too stark.”