Markets – like governments – tend to prefer a sure thing.
While protectionist policies don’t tend to drive market euphoria, president Donald Trump’s action on policies from trade to immigration seem to have already had an inverse effect, combining with the promise of tax reform and deregulation to lift global markets and raise expectations of a new era in which monetary policy will be trumped by fiscal spending.
The surge in equities last week that sent the Dow Jones industrial average above 20,000 for the very first time is as good an indicator as any that taking the president at his word is a pretty safe bet. At least for now.
Less than a week on the job and Mr Trump has already begun to tick-off his campaign promises, signing executive orders on everything from a restart to the Keystone XL and Dakota access pipelines to a wall on the border with Mexico.
And even as the appointment of former Exxon chief executive Rex Tillerson as US secretary of state signalled a willingness to work with oil-producing nations, such as Saudi Arabia and Russia, Mr Trump’s plan to put America on the road to energy independence singled out Opec as a “cartel” and sent a warning to any nation “hostile” to US interests.
The message was unambiguous: America won’t be put over a barrel.
None of that stopped Mexican stocks from their biggest one-day rise since the election. Nor did it dampen Russian enthusiasm for Mr Trump or his energy plan, with Russia’s foreign minister pointing out that presidents Trump and Vladimir Putin share many of the same geopolitical views.
And while today a rapprochement with Russia and the end of US-led sanctions may seem inevitable, what government would be willing to bet on the sagacity of an administration that relies on “alternative facts” to argue its case? After all, wouldn’t making America great again be accomplished at the expense of other countries? What tensions would that create in international relations, trade-related and otherwise?
Already, Mr Tillerson’s vow to send a “strong message” regarding the South China Sea has caused pushback from Beijing and furious anti-American rhetoric from state-run media. Can Mr Trump’s economic overhaul withstand retaliatory measures against some of America’s biggest corporates?
And while much may be said of any politician who keeps his word, Mr Trump may find there’s more riding on his executive actions than he bargained for, as global markets continue to react less on the long-term implications of his policies and more on the hope that Trumpenomics will ignite a new era of global growth. Hope, as we may soon see, may not be such a sure thing after all.
business@thenational.ae
Hadley Gamble is a reporter and anchor for CNBC, covering the Middle East and Africa, and can be followed on Twitter @_HadleyGamble.
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