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The people have voted and Donald J.Trump will be the next president but more importantly the Senate and House are also Republican as well, something that Obama never had. In simple terms this president actually has power and can get bills passed, worrying but also if handled correctly Trump could surprise and be better than expected. He will be sworn in on the 20th January 2017. In the first 100 days he can get a lot done and undone; likely he will look to undo much of Obamas Affordable Health Care Act.
Once you get past the personality and loud talk this is a man that is primarily a businessman and not a politician, he wants less government and wants a lower corporate tax rate. Individual income tax rates would be cut to 12 percent, 25 percent and 33 percent, while the corporate tax rate would be reduced to 15 percent from 35 percent and the estate tax would be eliminated. Bringing down the corporate rate to 15% will be a great boost for company earnings.
The lower 15% rate for repatriating funds to the US should also be a big boost. Many technology companies such as Apple, Microsoft and Cisco have massive amounts of cash outside of the US that could be tempted back with these lower rates.
Other areas of Trumps policies are not so clear yet but anticipate higher defence spending and re negotiations of trade agreements such as NAFTA. Trump is about cutting red tape for US businesses, reducing legislation and at the same time protecting companies from unfair foreign imports.
Casino stocks a bright spot under Trump
both Casino magnets Steve Wynn (WYNN) and Sheldon Adleson (LVS) were big Trump backers so the casino business is going to get an easier ride in the US as far as regulation goes. MGM with a big exposure to Las Vegas and other US regional casinos stand to do well from more available consumer spending. Having a president with experience in running and owning a casino is something that I never expected we would ever see.
Financial stocks also stand to do better under Trump as he will be able to appoint regulators who are more industry friendly than regulators appointed by President Obama. Obama was never keen on banks such as Goldman Sachs (GS) or JP Morgan (JPM) whereas Trump will understand these financials much better. The whole financial sector (XLF) which can be backed with an ETF stand to have a better 4 years then they have had. Also if we start seeing higher US interest rates banks will have better lending m Fed governor Janet Yellen will be replaced but I believe this will be in February 2018 when her current term ends.
it’s still very early days and the dust has not even settled yet but I will make a bold predication and this the Dow Jones Industrial average is at least 30% higher than it is today by the end of Trumps first 4 year term – so 2021. That would give us a Dow of 23,000 to 25,000. Of course this will not be a straight line up but the stage is set for stocks to move higher. Typically is year 3 and 4 of the presidential cycle that does the best.
I believe we are in for 4 years of better growth in the US, with a pro-business president and a reduction of government red tape. We will also see the US negotiate better trade deals. On the negative side I am sure there will be some cringe moments especially on international affairs but just like ex Italian Prime Minister Silvio Berlusconi he will some who get away with it.
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