Financial markets have been on an optimistic, positive run since Donald Trump’s election as US President in November. Yet cautious commentators have warned this may be a false start that could quickly reverse if Mr Trump gets to implement his extreme policies.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
Financial markets have focused on his promises to cut taxes, spend heavily on infrastructure and reduce regulation. They have chosen to ignore his threats of 35 per cent tariffs on imports from Mexico, China and elsewhere, his ban on Muslims and his Mexican wall.
It is now looking more likely that the markets will be proven correct.
Mr Trump has been forced against his will to honour the deal agreed by the previous president to resettle refugees from Manus Island in the US. The Muslim ban has been ruled illegal in court and that decision upheld on appeal.
Now we hear Mr Trump has had a lengthy and cordial discussion with the Chinese President Xi Jinping. Prior to his election Mr Trump talked with the President of Taiwan, angering China. Now he has downplayed that contact and confirmed the “one China” policy.
So relations with China are off to a sound start. It now seems unlikely that the madcap idea of a 45 per tariff on Chinese imports will come to pass.
Those worried about Mr Trump have hoped he will be prevented from implementing the extreme elements of his agenda by Congress, the courts, and the government’s advisers, senior staff and structures. That is looking more likely.
All we need now is for “The Wall” to be downgraded to a normal fence.
Other economic forces at work that have nothing to do with Mr Trump are pointing in a positive direction. The majority of US companies have now reported their December quarter profits. On average they are up about eight per cent on a year earlier, stronger than analysts expected.
US employment is strong and manufacturing activity is increasing. China’s imports and exports are both growing and Europe’s data is improving.
Australian companies are about to start reporting December half year results and analysts expect to see an improving trend. Mining and energy companies have benefited from a rebound in the prices of commodities like iron ore, coal and oil.
The record low borrowing costs are delivering a strong stimulus to business. The doomsayers who claimed the Chinese economy was going to collapse taking with it Australia’s export opportunities have also been proven completely wrong.
We aren’t out of the woods yet with Mr Trump’s protectionist and confrontationist policies still some threat, but that threat is reducing.
