In reality, keep in mind that it is the House that initiates new tax legislation, not the President. Would President Trump really veto a tax bill with a border adjustment tax? To a significant degree, Trump’s success in implementing his agenda may well be directly dependent on how seasoned the politicians are at the other side of the negotiating table.

In my view it is no co-incidence that German Chancellor Merkel shrugged off Trump’s recent assault on German trade policies suggesting to wait and see what the actual policies of the new administration will be. She is a battle-proven politician who has dealt with rather eccentric partners in the Eurozone debt crisis (remember Greek finance minister Varoufakis?).

But do not under-estimate the power of the bully pulpit: we all "know" that the banks are responsible for the financial crisis, right? While I don’t want to downplay the role financial institutions played, where is the ire at the politicians that put rules and regulations in place that incentivized bad behavior? Politicians own the bully pulpit, not bank CEOs. In that context, it is in my view no coincidence that Facebook CEO Mark Zuckerberg has as this year’s project to travel the country to get to know the people better. With pictures of him with firefighters, farmers and other "regular" people, he either sets the stage for running for President, or he is taking steps to fight the image that Facebook is responsible for fake news, the rise of terrorism or other ills of the world, a perception that might be promoted by the Tweeter-in-chief. The bully pulpit is effective when there’s an overlap of perception and reality.

New policies may be hiding in plain sight

So are Trump’s tweets merely an opening salvo to negotiations? In some ways yes, as we see Trump more like a third party President. Trump may well need to reach across the isle if he wants to have a substantial infrastructure spending program, as there are more than a few budget hawks amongst Republicans that scoff at a trillion dollar infrastructure spending program. Although divided over a ten-year horizon as stipulated, $100 billion a year ain’t what it used to be. More than a few people are scratching their heads about how Trump wants to succeed in replacing Obamacare, as any new rules will require a sixty person majority in the Senate.

What is striking to us is the juxtaposition between what at times appears to be off-the-hip shooting by Trump on Twitter and the clear policy path his cabinet nominees have presented in their hearings. Be careful, by the way, not to confuse "clear path" with agreement or disagreement: as an investor, understanding the proposed policy takes priority over one’s own conviction as to what the better policy ought to be. To me, it means Trump delegates. I don’t think he could have built his sprawling empire if he micro-managed. Whereas former President Jimmy Carter at some point managed the schedule for the White House tennis court, Trump is at the other extreme. So much so that he has time to tweet, so much so that he doesn’t listen to each and every security briefing.

A common theme in the nomination hearings I listened to has been the importance of clear policies; the importance of consistent policies; and the importance of adhering to agreements. If you aren’t scratching your head on how to reconcile this with Trump’s comments, you aren’t paying attention.

In our 2017 outlook Webinar (please watch a replay by clicking here), we dived into various potential policies a Trump administration might bring. Here, let me touch on fiscal policy, taxes, trade, defense and regulation:

• Fiscal policy. Trump’s inaugural address built on his campaign and suggested a major infrastructure investment program. If implemented on the backdrop of low unemployment, we see this primarily as inflationary. That said, we wouldn’t be surprised if Congress won’t go along with Trump’s spending priorities; regardless of that, though, expect to see Tweets about great infrastructure projects under way (some of which will likely have been initiated already under the Obama administration).

• Taxes. As a simple majority is sufficient in Congress to change the tax code, we encourage anyone to study the Ryan tax plan, as he has the opening salvo in the legislative process. And please disregard any analysis that focuses on the reduction in the number of tax brackets - the number of tax brackets are, in my view, completely irrelevant, as to the impact for investors. What is relevant is whether businesses will, as proposed, indeed be able to deduct 100% of their investments in the first year rather than having to amortize them (this may encourage investments); and how that border adjustment tax proposal is going to look when all is said and done. What to look out for here is whether the U.S. tax system is shifting to a territorial one, i.e. where businesses are taxed no longer on their global income, but based on their U.S. income. If so, it may remove the incentive for businesses to move their headquarters abroad. And while many quibble over whether any money that’s going to be repatriated will be used to create jobs, that discussion, in my humble opinion, misses the point: more important is whether artificial barriers to allocate capital are removed, allowing a more efficient allocation of capital. Another detail may have big implications: the Ryan tax plan would no longer allow the deduction of net interest expense; if implemented, it provides a disincentive for leverage (in our assessment, that’s good for financial stability, but a headwind for growth).

• Trade. Both Trump and his nominees know that imposing 30% trade barriers is counter-productive. That said, a variant of Ryan’s border adjustment tax may well penalize imports and encourage exports. The proposal would no longer allow the deduction of expenses related to imports. If a variant can be devised that withstands scrutiny by the World Trade Organization (WTO), Trump may well claim victory on trade, even if no tariffs are imposed.

• Defense. While Congress might be reluctant to fully embrace Trump’s appetite for spending on infrastructure, a Republican controlled Congress may be more willing to invest in defense. Importantly, China’s building of artificial islands in the South China Sea was compared to Putin’s annexation of Crimea during the nomination hearings. I mention this because there too the tone is set. I wouldn’t be surprised if those islands will be a priority for the new administration; the argument may well be to contain China before they become too strong. If so, I believe the risk for a trade war resulting from that dispute to be higher than from a more traditional trade negotiation over, say, the NAFTA, agreement (e.g. China retaliating by making life difficult for US tech firms; or by banning grain imports under the disguise of health concerns).

• Regulation. Finally a world on regulation: one reason why Trump can dismantle many of Obama’s policies is because he governed by re-interpreting regulations without a change in laws. The executive branch has quite a lot of leeway here, and if Trump doesn’t get what he wants in Congress, he may well pursue a similar strategy. We have already seen this with a directive not to enforce aspects of the Affordable Care Act. The problem with governing this way is that it provides uncertainty to businesses: the one thing worse for business than regulation is uncertainty over regulation. A key reason why expectations on real growth rose after the election was, in our assessment, a perception that a unified Congress could pass laws to not only reduce regulation, but to provide clarity that might outlive the administration. To the extent that such optimism is unwarranted, we may well see real growth disappoint expectations.

So what does it all mean for investors?

To gauge what it all means for investors, keep in mind the backdrop: stocks have appreciated for years, including a post-election rally. Bond yields not long ago reached historic lows. And the dollar index was up four calendar years in a row. So if you are bullish on stocks, keep in mind that stocks might be expensive. If you are bearish on stocks, will bonds provide the refuge even if inflation ticks up? And that dollar, will the greenback really soar?