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Rowan Dartington's Stephens: Trump & Circumstance

24 January 2017

Guy Stephens, technical investment director at Rowan Dartington, gives his view on the difference between Donald Trump as a candidate and as a president.

By Guy Stephens,

Rowan Dartington

Edward Elgar’s ‘Pomp and Circumstance’ is synonymous with school graduation exercises in North America and is just as familiar in the US as it is in the UK.

I haven’t been able to determine whether it was actually played at Trump’s inauguration ceremony but it probably should have been as we witnessed one of the least experienced political operators take power.

Many observers had hoped that we would see a big difference between candidate Trump and president Trump and that he would begin to behave like an international statesman and the leader of the free world.

Unfortunately, what we saw before his election victory is looking exactly like what we have got. The most worrying aspect to this is his strong message around ‘America First’ and determining precisely what this means.

Performance of US dollar vs sterling since presidential election

 
Source: FE Analytics

For a long time now, successive US presidents have wielded their power very carefully, diplomatically manoeuvring around historic and cultural sensitivities in the pursuit of stable and progressive international relations with other nations, and above all avoiding conflict. 

The last great US power crusade was in response to 9/11 which resulted in the Afghanistan invasion to destroy Taliban training camps which lasted from 2001-2014.

Concurrent with that, from 2003-2010, we had the invasion of Iraq to remove Saddam Hussein who was erroneously linked to 9/11 in the US and removed from power on the premise of having weapons of mass destruction.

Much of the latter periods of these conflicts have involved political damage limitation and military extraction from a messy outcome due to the absence of any appropriate planning to deal with the consequences of cutting the head off the Hydra.


The political fall-out in the US and UK has been very damaging leading to the successful legacies of George W Bush and Tony Blair being somewhat destroyed.

Consequently, there has been little appetite for the US to get involved in any more global military ambitions.

This reticence has allowed the Arab Spring uprisings of 2011 to evolve randomly, enabled the subsequent establishment of ISIS and the ambitions of president Assad to proceed without any external interference.

Also, Russia has sensed an opportunity to humiliate the US and raise its profile by invading Crimea and assisting Assad.

To say that the US has an impotent military will would be an understatement and is probably the one criticism under Obama’s watch that does have some merit.

So, what of Trump in this area? Economically, the perceived benefits of his planned tax cuts and infrastructure spending are there for all to see and have been priced in to markets to a significant degree.

We are now seeing a pause for breath and a focus on the reality of the potential negatives of protectionist trade barriers and foreign policy causing the US dollar to weaken.

Putting an inexperienced political graduate into the White House introduces a significant element of uncertainty, all the worse given his propensity to shoot from his proverbial social media hip.

As we have seen with Taiwan, one phone call and one tweet has raised the hackles of the world’s largest economy and the major driving force of global growth over the last ten years.

He has previously said that he doesn’t want to get involved in the world’s conflicts, whilst branding NATO as obsolete and making disparaging comments about the UN and other members of the security council.


This is potentially incendiary. On the one hand we have a US struggling to find its global identity with a commander-in-chief who would appear to want to continue with Obama’s policy of retrenchment whilst on the other hand he ignores historical protocol and manages to antagonise many of the world’s leaders. In the process of stepping back from other nations’ disputes, he is creating his own and that is very disconcerting.

His oratorical displays are littered with inconsistencies, which adds to the confusion but if he starts tweeting disparaging comments like a graduate teenager to China regarding its ambitions in the South China Sea, his paranoid spats with the media are going to look like a sideshow.

All political leaders have to have an ability to swallow hard, count to ten or even twenty and respond in a thoughtful, diplomatically sanitised way – if Trump transfers his personal sensitivity and disdain of the media to the likes of China or Russia, we may have a whole lot of trouble ahead.

I would say that this is the potential elephant in the room at the moment dependent on how other leaders react to Trump.

Performance of S&P 500 since presidential election

 

Source: FE Analytics

At least we haven’t got another Trump character anywhere else in the world that wields significant influence but if he makes comments and promotes policies designed to challenge the very essence of what lies behind Russian and Chinese political existence, we need to run for cover.

The priority for Trump last week seemed to be winning the argument on how many people attended his inauguration ceremony – his first real piece of business is likely to be repealing Obamacare.

If its replacement pushes 20 million people out of the healthcare system having recently acquired it, we will have our first confirmation and evidence of his bulldozer mentality and if he transfers that onto the world stage, that is a real worry.

Guy Stephens is technical investment director at Rowan Dartington. All views are his own and should not be taken as investment advice.

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