The Trump Impact

Trump needs to start working on big issues and stay away from the petty stuff or he will destroy what is left of the goodwill in the markets.

The election of Trump boosted the stock market and hit the bond market, but since Trump has taken office, these markets seem to have frozen in their tracks. Despite a string of strong economic reports and legitimately better-than-expected earnings, stocks have not moved in two weeks.

Trump’s temper keeps getting in the way. That Trump is thin-skinned is not news to anyone, but a lot of people expected a more presidential tone to replace his inflammatory rhetoric. Anyone who thought President Trump would be different from candidate Trump simply wasn’t paying attention.

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Trump and the Prime Minister of Australia had a testy exchange Wednesday night, and the scheduled one-hour call ended abruptly after 30 minutes. Trump also managed to take another swing at Mexico, but hurling insults toward Mexico is standard operatingprocedure.

The fact the market is hanging in there is a testament to how much traders and investors believe his actual policies, once instituted, will improve corporate earnings and the economy. If it were not for this hope, the stock market would be hitting theskids and bond yields would be plummeting.

But, you have to wonder how much longer this honeymoon can go on. It already seems to be over in the currency market. The dollar is now close to where it was before the election. Trump needs to start working on some of the big issues and stay away fromthe petty stuff or he will destroy what is left of the goodwill in the markets.

Dwight Johnston is the chief economist of the California and Nevada Credit Union Leagues and president of Dwight Johnston Economics. He is the author of a popular commentary site and is a frequent speaker at credit union board planning sessions and industry conferences.

February 2, 2017

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