The year’s election of Donald Trump as US president was seen as a watershed moment for the rise of populism and represented a sharp turn away from politics as normal, but what impact has he had on markets one year on?
Since Trump was elected on 8 November 2016, the S&P 500 has risen by 22.77 per cent – in US dollar terms.
Performance of S&P 500 since Trump election
Source: FE Analytics
However, while there was a ‘Trump bump’ following the election as markets reacted positively by pricing in election pledges to cut taxes, reform healthcare and increase infrastructure spending, there has been little obvious progress that can be attributed to the new president.
“There was an initial euphoria but that has given way to market scepticism,” said John Stopford, head of multi-asset income at Investec Asset Management. “You saw a repricing of inflation expectations, companies that would benefit from tax cuts, but most of those relative performance moves have faded.”
He added: "Markets as a whole have done very well, but we wouldn't ascribe much of that to Donald Trump.
"Equities have rallied strongly, bonds have been well-behaved, other assets like credit and so on have done very well, but I think that reflects a combination of strong and accelerating global growth and easy monetary policy.”
Indeed, Nadia Grant, head of US equities at Columbia Threadneedle Investments, said US equities had been growing since before the election and dating back to the global financial crisis.
She said: “As the US economy recovered – driven by the housing market, a shale renaissance, and a financially sound consumer – so did corporate earnings.
“Seven years into the recovery and the economy is still growing at a muted but steady pace with no exuberance to derail its path.
She added: “Corporate earnings are now fuelled not only by a sound domestic backdrop, but also a synchronised global recovery fuelling demand for US goods internationally. 
“I think what Trump has added to that has been mostly noise and uncertainty and volatility,” said Investec’s Stopford.
"He has made promises that have got mixed potential consequences for markets but has delivered very little.”
In his first months as president, Trump – who took office in January – has been at the centre of several social media outbursts and led a divisive political agenda in a year marked by several controversies.
One of his main campaign pledges – to repeal Obamacare – failed after he struggled to secure support from Congress, seen as conditional for funding promised tax cuts.
Although the US president has moved ahead with his ambitious plans for tax cuts, questions remain over how Trump will balance budgets to implement them should they be passed.
With corporate tax rates of around 35 per cent, the US has one of the most punitive rates in the world compared with other developed economies. (In comparison the UK has a corporate tax rate of 19 per cent).
“If handled well, the Trump administration may be able to build a consensus to improve the competitiveness to US corporation tax by cutting rates,” said Columbia Threadneedle’s Grant.
“We would put the odds slightly over 50 per cent that Congress is successful in passing tax reforms, bringing corporate tax rates to 20 per cent.”
“Maybe now we might see tax cuts and reforms being passed but that's far from certain given congressional arithmetic,” said Stopford.
Renegotiating trade deals to include better terms for the US has also been a key theme during the past year. Trump has frequently threatened to impose new tariffs on countries – such as China and Mexico – perceived to be profiting at the expense of US companies.
He has also begun negotiations to renegotiate the North American Free Trade Agreement (Nafta) with both Canada and Mexico, even threatening to pull out of the agreement
“One year on from his election, Donald Trump is struggling to live up to the promises he made on the campaign trail to get tough with countries that run big bilateral trade surpluses with the US,” wrote Gareth Leather, senior Asia economist at Capital Economics.
“However, it is clearly too soon to sound the all-clear, especially with regards to Nafta, where fears are growing that the deal could completely collapse.”
He added: “Pulling out of the deal would be greeted with strong opposition from corporate America and also cause huge disruption to regional supply chains.”
It is Trump’s unpredictability that has caused concern among US market watchers, with few able to anticipate the changeable president’s next move.
Should he be able to implement some of his agenda, however, markets could benefit.
“Our view is that it’s likely to remain pretty noisy. Trump may be positive if he gets some of his agenda passed, he may be negative if he follows through on some of his threats.
“The other two aspects: one is longer time goes on that he doesn’t actually achieve anything the risk is that ups the populist side of things and plays to his base, which I'm not sure is helpful.
“Then there is the event that he gets impeached and doesn't last a full term.”
Stopford added: “I think he's going to keep markets and media busy but ultimately the bigger driver is going to be economic fundamentals, broader – particularly monetary – policy, and so on. So far he's said a lot and done little.”
Whether the US president is able to implement his tax cuts and renegotiate new trade deals, or not, the US corporate space remains healthy, said Columbia Threadneedle’s Grant.
“With about 35 per cent of earnings derived from overseas, the consensus therefore estimates US earnings will grow above 10 per cent in 2017 and 2018,” she explained.
Grant said the fundamental backdrop for US equities has been robust in 2017 with strong corporate profits growth and expects that to continue into 2018.
“On 17x consensus earnings for the next 12 months, the market seems fairly priced relative to long-term history and vis-a-vis the strong earnings growth it is set to generate,” she added.
“When looking at other asset classes such as Treasury bonds, whose prices have been distorted by monetary policies, the equity market looks inexpensive.”