The equity markets recovered from their negative views of a Trump Presidency very quickly. As we argued before the event, there are central aims of his economic policy that favour shares.
His wish to boost infrastructure spending is good for the construction industry, with second round effects as the improved infrastructure raises business efficiency.
His wish to cut the rate of business taxation will be a major boost to business sentiment and investment.
His aim to get US corporations to repatriate large sums of money they are holding abroad would also be a further stimulus, boosting tax revenues and leading to further US corporate spending.
A little more detail is emerging on what his priorities will be. He and his party in the House and Senate are keen to repeal Obamacare. This will be a difficult political battle, and requires thought on what will replace the outgoing system.
Health-related stocks have been popular on the hopes of a better settlement, but we are a long way off seeing it, and it does require legislation.
His main priority is likely to be boosting jobs and incomes, as this seems to have been the main preoccupation of Trump voters. There are no quick wins on trade treaties, but he does have some executive powers which he might try to use to retaliate against imports where he can make a case of unfair trading.
He will want to press on with individual income tax cuts as well as business tax cuts, to boost take home pay and spending. The House may have issues over the forecast level of the deficit, but a Republican majority should be amenable to some tax cuts to provide a boost.
He’s sceptical about renewable power and happier to support conventional oil, gas and coal developments. He sees the need for cheap energy to support industry, regardless of the climate change effects.
China is likely to be the main target of any rhetoric about the impact of foreign imports on US jobs, which could have some adverse impact on perceptions of Chinese markets by US investors.
So far, the markets have decided shares will do better than bonds. They have also decided to raise the longer-term rate of interest from the very low levels of before the vote. That seems like a sensible response to what we know so far about the Trump plans.
We prefer shares to bonds, subject to the risk levels a portfolio can accept. We will keep you updated as more news emerges of who will have key positions in the new Administration, and as more information is released about the President Elect’s aims for his first days in office.
John Redwood is Charles Stanley’s Chief Global Strategist.