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Donald Trump marks his first 100 days in office as 45th President of the United States on April 29. This random date is of importance because Trump himself set out a 100-day plan in October 2016, before he was elected. The first 100 days is a performance benchmark for Trump set by Trump himself.
Trump’s self-described ‘Contract with the America voter’ can be found here:
That Trump hasn’t checked off every box on his 100-day to-do list is not a reason to panic. From a markets standpoint, very few of Trump’s pledges for the first 100 days really matter. Markets specifically want Trump to get the job done on tax cuts, infrastructure spending and deregulation. Significant policy overhauls can’t happen in 100 days.
The initial knee-jerk sell-off after his election shows that Trump has the potential to do damage to stock markets but overall Trump’s first 100 days have been accompanied by buying euphoria. There was a bit of a wobble when Trump withdrew Paul Ryan’s unpopular replacement for Obamacare but markets consolidated afterwards instead of selling-off further. With central banks as a backstop, investors have confidently bought any Trump-induced dip. This is just like after every other geopolitical shock since the end of the financial crisis.
One might say Trump has been a welcome break from talking about central banks – but really it’s the low interest rates and giant central bank balance sheets that matter the most to markets. Trump’s executive orders and teasing Tweets have shown good intent on pro-growth policies and so far that’s been enough to keep the party going.
Stocks were trending higher long before Trump took office, so the question is whether he can derail the boom, rather than create one.
A comparison between US and other global equity indices since Donald Trump’s inauguration on January 20 reveal a telling phenomenon. The Dow and S&P 500 have underperformed Germany’s DAX index but outperformed the UK’s FTSE 100 and Japan’s Nikkei. Admittedly most of the German outperformance came from a French election relief rally. If Trump is the main driver of stock market optimism, why are German stocks doing better since he was elected?
Chart of global equity indices since Trump’s inauguration
Source: Bloomberg, 27/4/2017
Looking within the US stock market, the Trump-effect is even less visible. The sectors that stand to benefit from Trump’s promised policy-changes have performed in line with the wider stock market since his inauguration. Since inauguration day, the sectors that would be neutrally or negatively affected by Trump varied the most from the S&P 500.
Chart of S&P 500 sectors since Trump’s inauguration
Source: Bloomberg, 27/4/2017
As a group, financial stocks (XLF) which should benefit from stronger economic growth and promised cuts to regulation have slightly underperformed the wider stock market. Industrial stocks which would benefit from infrastructure spending (XLI) have only slightly outperformed.
The S&P 500 healthcare sector ETF (XLV) has outperformed the wider market despite a series of high-profile tweets and comments by Trump about cracking down on drug price gauging. The information technology ETF (XLK) has been a top performer even though tech was thought to be an area that could be negatively affected by Trump’s focus traditional industry. A downturn in oil prices this year has hurt the S&P 500 energy sector ETF (XLE).
Investors priced in a Trump-effect on the performance of US stocks vs international stocks and Trump-supported vs unsupported sectors before the inauguration, but not since. Our conclusion is that during his first 100 days in office, investors have lost some faith in Trump but not in the stock market rally.
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