“Elections have consequences.” Yes, they do. Moments after the results were known, world investing markets entered a tailspin. Investors had already factored in a Clinton victory. It appeared initially that the investing world did not want a Trump presidency, but that was not necessarily the case. Investors were simply caught off guard and were pulling funds off the table to give some time to assess the situation.
Before U.S. markets had opened the following morning, the climate had changed dramatically. The new reality of a Trump led Republican majority quickly gained approval from the markets as investors determined this may actually lead to a positive outcome.
Without getting into political issues, let me just give my take on how I believe our newly elected government may affect investors and the economy. Keep in mind this is based on anticipated policies. We cannot know which of those policies will actually be enacted. Here are two key topics I believe could positively affect investors and the economy as a whole.
Regulations - As a businessman, Trump appreciates the “yuuuge” drain that regulations can have on business and economic growth. He has promised to roll back many of Obama’s executive orders and other departmental regulations that are seen as being stifling to business. Just this week I taught seminars on the potentially negative effects of the new Department of Labor Fiduciary ruling set to take effect next April. I consider it a significant positive for investors that Trump has indicated he will repeal this ruling.
He has also promised to have all agencies do a top-down review of current regulations. Average Americans do not notice the heavy weight of regulatory burdens placed on businesses, and the unproductive costs involved in complying with them. A reduction in regulations would positively affect the bottom line of American companies, and encourage new growth.
Taxes – Trump promised to reduce corporate taxes. American corporations are some of the highest taxed in the world. A tax on a corporation is only a tax on its stockholders, its employees and its customers. Reducing these taxes will free up more money for growth, dividends and wages, and encourage more companies to maintain or seek a U.S. base. He is also proposing incentives to allows companies to repatriate foreign dollars. If companies that hold billions of dollars overseas are allowed to bring those dollars home, it could provide significant resources to spur additional growth.
President-elect Trump has promised to simplify and streamline taxes so that 90% of Americans could file on a postcard. Complying with our current tax code is a major drain on personal and corporate productivity. Any improvement here would be an economic benefit. The current makeup of government may finally make tax code simplification a reality.
As a president who understands the business world, I think investors are now viewing Trump as one who will enact policies to favor business, and thereby favor investors. Purely from an investor viewpoint, I view this election positively.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 1173 S. 250 W. Suite 505, St. George, UT 84770.
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