Faced with a Tweeter-in-chief, how are investors to navigate what’s ahead? Is there a strategy behind President Trump’s outbursts; and if so, how shall investors position themselves to protect their portfolios or profit from it?
With all the outrage about Trump’s style, we have all seen equity markets rally in the aftermath of the election. Is the rally due to investors loving the policies proposed in Trumps’ tweets? We argue no, if only because one can hardly call most of his tweet storms policy proposals.
• Get multiple perspectives. That means, embrace news outlets that disagree with your political views. If that’s too unbearable, at least follow journalists of those outlets on Twitter that write coherently, even if you disagree with their views. Get an outside perspective by reading (or listening to) foreign news services from the UK, Europe (I mention Europe separately from the UK, as news coverage is different on the continent), the Middle East and Asia. What does German chancellor Merkel think of Trump’s recent assault on Germany? Look it up to gauge how the dynamics might unfold.
• Go to the sources. In our office, we listened to hours of confirmation hearings to get a better handle of what policies the new administration might pursue. We listen to or read speeches of central bankers, policy makers and influencers around the world.
• News breaks on Twitter. With a Tweeter-in-chief, it’s not a matter of political preference, but one of staying on top of the news to follow @realDonaldTrump (he now tweets under the handle @POTUS as well; Obama’s Twitter handle has been moved to @POTUS44). Following policy makers allows you to stay on top of breaking news. Following influencers allows you to receive close to instantaneous interpretation of the news. On that note, please ensure you follow @AxelMerk.
So what have we learned from our Tweeter-in-Chief?
• Trump likes to take credit, but does not like to own problems
• There’s method to what appears to some as madness
• New policies may be hiding in plain sight
Not owning problems
Trump says he is a "winner." To defend this brand, he disavows any potential problems. He throws Schwarzenegger under the bus for not-so-great ratings on his first appearance on the Apprentice, so any decline on the program doesn’t reflect badly on him. He cautions Republicans to be careful not to own "Obamacare" when it’s pretty obvious that Trump himself might be "owning" it; the cost of healthcare will continue to rise independent of the healthcare system we will have; as a result, odds are high that there will be lots of unhappy folks. He publicly denounces Paul Ryan’s tax reform proposal as being too complicated (he singled out the concept of a ‘border adjustment tax’), even as his nominee for Treasury Secretary Mnuchin all but admitted that Trump’s tax proposal was written on the back of an envelope (he didn’t quite say that, but he did say that they had a very small staff and that it would take substantially more work).
There’s method to what appears to some as madness
All Presidents have the bully pulpit at their disposal, even as Trump’s use of it may elevate it to new highs (lower it to new lows?). Trump’s nominee for Commerce Secretary stated it succinctly in his nomination hearings: "When you start out with your adversary understanding that he or she is going to have to make concessions, that’s a pretty good background to begin." The Financial Times recently published an OpEd that discusses how Mr. Ross thrived in his career employing this principle. From the article: "The first step in such negotiations is to get everyone to admit to the problem, perhaps even to create an exaggerated sense of it, so that no one thinks it can be ignored until tomorrow."