President Trump. Wow.
What a surprising and shocking upset it was. Literally no one had this happening. The pundits were all saying it would be an early night. The polls and the prediction and "betting" markets all had Hillary winning handily. However, as the night wore on it became clearer and clearer that Trump's victory path was transforming from a "Hail Mary miracle" to a stunning reality.
Investors went into hysteria on this news, at one point dumping Dow futures in a frenzied panic and driving the index down by 800 points. It was a ridiculous display of childish hysteria. Call it a flash crash. And this morning? The Dow's up as of this writing. Yawn.
Like I always say, investors are mostly their own worst enemies because they allow themselves to be swayed by fear and emotion, almost always.
While Trump's victory was nothing short of a political revolution, it also represents a seismic shift for the markets and the economy. While it still may be a little too early to tell for sure, I am starting to believe that this could be the beginning of a paradigm shift. A paradigm shift over the very structure and composition of our economy and what the markets have deemed valuable and thus rewarded, and what the markets have eschewed, for the past 30 years if not longer.
Just consider some of Trump's economic proposals. He wants to cut taxes, spend $1 trillion on infrastructure repair and rebuilding. He's talked about renegotiating our trade deals and/or, imposing tariffs on China and Mexico. He's for taxing companies that are looking to close domestic factories and seeking to export jobs. He wants to repeal and replace Obamacare and drill more for domestic energy needs.
We don't know the specifics of these things yet or in what form they will be passed. However, these proposals are nothing short of radical and ambitious, to say the least. Furthermore, he can likely get them passed, because he will have a Republican controlled Congress to work with.
The spending and investment stuff is long overdue and if he can get some of that passed I can tell you that the economy is likely to scream. We'll see growth like we saw in the Reagan years, with GDP expanding at 5% or 7% annually. The stock market will be in a powerful bull market.
One thing that does concern me about Trump are his views on the debt. He sees the debt as most people do, which is to say, incorrectly. He has bought into the fallacy of the debt as some "ticking time bomb" that has to be brought down otherwise we'll bankrupt our children and grandchildren, etc. This is a false narrative as I have explained in the past and a dangerous one as well. If Trump decides to reduce or eliminate the debt, then all his great economic plans will be rendered ineffective. It will surely throw us into recession.
Luckily, however, this is not a worry for now, but maybe sometime near the end of the first quarter of 2017, when the debt ceiling has to be raised. That will be Trump's first true test of his handling of the economy.
As an aside, I can tell you one thing right now that I do think we can bet on in light of this political upheaval: we will see similar upheavals all throughout Europe in the coming year. There are many elections that are going to take place in the EU in at the end of this year or in 2017. There are Hungarian elections, Romanian elections, France's presidential election, Dutch parliamentary elections, U.K. local elections, German parliamentary elections, just to name a few.
Trump's victory is sure to embolden many anti-Europe, anti-establishment, anti-immigration, anti-globalist politicians and political candidates. What this likely means is that the euro will be facing a particularly rough year. The very future of Europe may be called into question, just as the powerful forces of the establishment here were nullified by Trump's victory.
The euro could be a great sale right now before these forces really get going. It's a position that is worth considering. Three ETFs you might want to consider looking into are the UltraShort Euro ETF (EUO) , the Double Short Euro Index ETF (DRR) and the Short Euro ETF (EUFX) . The first two are leveraged, so you get more bang for the buck. I would only buy them on days when they are down.
