In a recent webinar interview with Jason Desena Trennert, Managing Partner, Chairman and CEO of Strategas Research Partners, NYSE Floor Governor Rich Barry asked Jason for his views on policy and market dynamics leading up to the new administration.
7 Highlights from the Interview
Ahead of the election, U.S. markets were trading at all-time highs but there were signals of uncertainty: large short sale positions, net redemptions in domestic equity flows into mutual funds and ETFs since 2009, corporations and foreign buyers making up the biggest buyers of stocks in the U.S. Jason and Rich discuss how this trend differs from previous bull markets.
When asked how a Trump presidency could impact asset classes, Desena Trennert analyzes monetary and fiscal policy, regulatory framework and trade approach. From his analysis, he makes the following prediction: A Trump presidency will be bearish for bonds / fixed income due to inflationary policy and bullish for equities.
He expects the Fed to tighten in December, and believes it will be difficult for the U.S. central bank to normalize rates as quickly as they would like. He also analyzes what it means for the Fed to be intertwined with other central banks around the world, such as the Bank of Japan and the European Central Bank, that are pursuing negative interest rates.
Desena Trennert identifies two potential changes to look for in the first 100 days of the Trump presidency: (1) Tax cuts on repatriated profits and (2) an easing of bank and energy regulations. He discusses the impact of tax cuts on the U.S. Treasury and how changes to currently stringent bank and energy regulatory policy may impact commerce.
Determining whether future trade deals are going to be somewhat tougher while still in line with the concept of free trade or if there will be a meaningful departure from the current approach is key to assessing trade policy risks for U.S. companies and the potential impacts.
As an employer himself, Desena Trennert expects changes. He discusses seeing meaningful increases in employer-paid premiums over the last several years and shares his view on the shift toward high deductible plans.
In accordance with Trump’s election campaign, Desena Trennert expects there to be substantial changes to Dodd-Frank. He explores the idea that existing regulatory policy may have, in some ways, sterilized monetary policy, citing the facts that the Fed’s balance sheet has quintupled in size while the velocity of money has decreased approximately 30%.