Advisor examines how much impact the President really has on equities
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Whatever your view on the man or his policies, President Donald Trump’s own self-worth is seemingly impenetrable.
After personal lawyer Michael Cohen implicated him in a crime at the same time former campaign chairman Paul Manafort was convicted on eight counts of tax and band fraud charges, talk of possible impeachment has grown louder.
Trump hit back and said such a move would cause the stock market to crash and result in everybody becoming “very poor”.
But how much impact would the impeachment actually have on the market? Brian D’Costa, founding partner at Algonquin Capital, said any one person’s impact on the market is fleeting but added that dismissing the President’s impact out of hand wouldn’t be wise.
He said: “In a way what Trump is really saying is, I have an agenda. So forget about his social policy stance and his behaviour. Let’s just look at the fiscal policy being delivered by his administration.
“It is one that does support the stock market, cutting corporate taxes and running a highly stimulative fiscal policy, which is good for corporate earnings.
“So any event that can reverse that, for example, I would argue that if the senate and the house go democratic, the stock market will have a bit of trouble because it will be thinking, will corporate taxes go up? Will there be more regulation not less regulation?
“From that perspective, I would argue that there will be some trouble in the stock market; these things are not going to persist for ever but there will be a pause to consider, can we get a change?”
D’Costa said that Trump is effectively saying, impeach me and you’ll get someone who is not as market friendly. The Toronto-based fixed income and derivatives specialist said that if the Democrats assume control, stock market investors will be forced to think about what that means. In the short term at least, that would have an impact.
He said: “You could see a small correction but you won’t get a bear market. But a pause to reconsider? I don’t think that’s out of line. That could be 1%, 2% or 10% but it can’t be a lasting impact.”
He added: “People will be thinking, is Trump trade over? Should I take some profit now? Is it going to fundamentally change the US economy? Probably not until you actually see policy statements and laws being passed and the market will address those. But there is always the knee jerk of let’s take money off the table.”
