Pick up the Tru-ck effect! It takes time09 August 2019
Love him or hate him, Donald Trump is at heart a businessman on a mission. With just over 15 months to go to November 2020, and the Presidential Vote, President Trump, along with many eyes of the world are focussed on his campaign and plan to win his seat in the White House for a second term.
President Trump's home popularity is high at this time (42.5% according to the website fivethirtyeight.com, 18 July 2019), but all has not gone exactly to plan. His Corporation Tax cut stimulus of spring 2017 was a bold, and technically clever, move. However, the results have not been as great as the move itself. They have somehow fizzled out and it is certainly not enough to give the US economy the concerted boost it needs leading up to next year's elections. Problems need solutions, and President Trump, as we all understand, is not a shy person when it comes to business.
It is important to remember that financial stimulus takes time to filter through the economic system to have the effect on the desired target. This might be businesses, or it might be individual consumers. US consumers like nothing better than to buy Trucks, Pickups to be exact, and Ford's F-Series (the best-selling pickup truck since 1977) was top of the sales chart. More can be found in the following link, however, you can see from the size of the best-selling vehicle (truck), any real environmental concerns the globe shares might be lower than anticipated across the pond. More here: https://www.businessinsider.com/best-selling-cars-and-trucks-in-us-2017-2018-1?r=US&IR=T
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Linking US trucks and US politics together might seem unusual, but it's not as hard as it first appears, because of the 'feel-good' factor. If you've got a good amount of dollars in your pocket, and you're feeling good/secure, you might buy a shiny new truck to stick on your American drive. And if your personal economic world is going well, would you want to change politically and cut the money off? No! So, President Trump needs to ensure that middle-America feels good, economically confident with high employment rates (60.60% currently), and that they know that he is driving their prosperity. And he will…..but he knows that he needs 6-9 months to make an average US citizen feel that way.
What could he do economically? There are various options, and we believe the main target has to be a trade deal and the end of a trade war with China. Trade wars hurt both parties involved, it's just a question of who hurts most. The ending of the current position would have a significant effect of US and world markets, but the benefits would take time to start to filter through. If we are correct on this (and absolutely no guarantees), this autumn looks likely to see a change that could, in the summer of 2020, make a difference in US homes and put a few more trucks on the drives of middle-America.
The US dollar is strong at the moment, indeed a bit too strong for exports, according to President Trump in July 2019 (More here: https://uk.finance.yahoo.com/news/trump-wants-weaker-dollar-could-112725195.html ) , which is in part a note to his frustration at The Federal Reserve. Global growth forecasts are weakening, according to the International Monetary Fund (IMF) in July 2019 ( https://blogs.imf.org/2019/07/17/rebalancing-the-global-economy-some-progress-but-challenges-ahead/ ), and this will put more pressure on the US to keep their exports flowing out of the US.
On this side of the Atlantic, Sterling has become weaker during the summer and with the issue of Brexit to be resolved (finally?) this autumn, it may be possible that this will get weaker (although not guaranteed). As we saw at the time of the Referendum, this may see values rise in UK stock markets.
It will be an interesting time for global stock markets over the autumn and winter, with, in our view, pressure upwards, although as always, this is in no way guaranteed. What happens after 2020 will need reviewing and may not be as positive as the notes above read. The final global pre-recession hurrah? Let's see.
No individual advice is provided during the course of this article.
Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner
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