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Election 2016

A New Recession Feared If Trump Is In Office

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  • The possibility of a President Trump has some investors and economists on edge about the markets.
  • “He’s talked about hurting free trade, he has talked about cutting taxes well beyond what would be a reasonable level.”
  • “Trump’s fiscal policies, frankly, don’t seem like they’re very credible to me.”
  • A likely consequence of Trump being elected, Orlando suggested, would be a recession in the first year of his presidency, with a down stock market to go with it.

Investors are deferring big bets until the results of the primary elections are clearer, but the possibility of a President Trump has some investors and economists on edge about the markets.

“He’s talked about hurting free trade, he has talked about cutting taxes well beyond what would be a reasonable level,” warned Phil Orlando, chief equity strategist at Federated Investors Inc., explaining that “Trump’s fiscal policies frankly don’t seem like they’re very credible to me.”

A likely consequence of Trump being elected, Orlando suggested, would be a recession in the first year of his presidency, with a down stock market to go with it.

Other prominent financial prognosticators have sketched out even more dire scenarios.

“The possible election of Donald Trump is the greatest threat to American national security, American prosperity and, indeed, American freedom, that is on the horizon,” said Larry Summers, the Harvard economist and former hedge fund adviser who was economic adviser to President Obama, speaking on Boston public radio Thursday.

Part of what concerns investors about Trump is that he has staked out policy positions on matters facing the federal government, including trade, immigration, fiscal policy, and much more, that they believe would harm growth if implemented.

On Friday, for example, the Chamber of Commerce warned that Trump’s threat to impose a 45-percent tariff on Chinese imports would lead to a recession in his first year and, together with other tariffs and trade restrictions he has suggested, cost the U.S. 7 million jobs.

In that regard, however, Trump is not alone: Economists surveyed by the Wall Street Journal earlier in March viewed the campaign proposals of Bernie Sanders, the socialist Vermont senator running as a Democrat, as even more potentially harmful than those of Trump, with those of Republican Ted Cruz not far behind. Of the five candidates remaining in the race, only Republican Ohio Gov. John Kasich has a platform that the economists thought would be helpful for the economy.

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With Trump, however, there is an added level of uncertainty because of his temperament and out-of-the-mainstream approach to diplomacy and national defense. Summers said there was a risk associated with the “whiff of fascism” Trump has emanated.

Trump’s aberrant campaign trail behavior is a particular source of risk for investors because he could act on them unilaterally in some cases. Harmful fiscal or other policies, on the other hand, would need the cooperation of Congress, making them less concerning. Furthermore, investors are used to candidates making alarming campaign-trail promises that are forgotten after the election.

Trump’s diplomatic management could create “a lot of chaos, which I’m sure would translate to some degree into markets, but how you’d invest in that I don’t know,” said Zachary Karabell, head of global strategy at Envestnet. “There are very legitimate concerns about Trump upsetting a lot of apple carts of how things are done diplomatically in a way that would be potentially negative for the United States.”

One area of policy in which President Trump could act unilaterally to significant effect is immigration enforcement, said Bill Conerly. Given the sweeping promises he has made about deporting illegal immigrants, companies that rely on such immigrants for labor “are going to be in trouble,” said Conerly, an economist and business consultant in Oregon.

Yet even those possibilities, for now, are remote, given that Trump has yet to clear the GOP primary election process, let alone win the general election.

“If financial markets have human characteristics, then financial markets are totally indifferent” to the election cycle right now, said Karabell, who noted that he would advise investors not to be too quick to react to campaign statements that have little chance of affecting policy.

Orlando, whose firm manages more than $50 billion in assets, said investors could pay closer attention to candidates’ statements once the general election is reached.

And if the GOP faces a contested convention in which a nominee other than Trump is produced at the last minute, that could also move markets. “From my perspective as someone that’s trying to figure out fiscal policy, someone like a [House Speaker] Paul Ryan or a John Kasich would be a significant improvement over Trump or even Cruz, so I think the markets would be pretty excited about that prospect,” he said.

Source: Washington Examiner

 

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17 Comments

17 Comments

  • Mark says:

    Compared to Hildabeast or the moron Bernie? ROTFLMAO! Those two will destroy the economy!

  • Barry says:

    He is the only one that can save us.

  • Gladys Taylor says:

    DT is a brilliant businessman. He is a patriot
    with our country and legal citizens

  • Tom says:

    The actions of the Fed and Obama have set us up for a recession already, no matter who gets elected. Trump would be our best bet to get out of one by getting jobs moving again. Businesses are choking on Federal regulations, that have kept the economy from growing.

  • dennis maat says:

    while its true trump is not perfect he speaks in generalities and what he might do. obama spoke in concrete terms and the damage he has caused is specific. he has been caught in a lie with healthcare claims in particular and no one tasks him. he came into office a nobody with no inkling of foreign relationships and has doubled the national debt in concrete terms. no problem if you don’t talk about it. no projection of problems with him but instantly we know trump is a problem. how is that possible?

  • larry says:

    Politics got us here, common sense will get us out. DT is the only one with CS.

  • larry says:

    Look at what we have endured for the last 7 years +. Lies and bad bad decisions.

  • Edward says:

    Trump is the ONLY real choice to possibly get us out of the ms Obammmmy has us in. We NEED a businessman , not another damn career Politician.

  • Harry says:

    When I read articles like this that tend to fear monger, it appears to me that those who would tend to think their lively hood may be affected become the squeaky wheel trying to save or get more grease. While I don’t agree totally with Trump on things, he does show that he see’s America’s decline, understands Washington’s ineptness in identifying issues effecting those who work and pay the most taxes, and appears to finally want to right this flailing ship. Whether the sore losers in Washington can accept Trump and understand the people who are speaking through acceptance of him is yet to be seen. Crony Capitalism has a disturbing influence that should not have a place in Washington or on main street for that matter. Yet it exists and is in large part what has destroyed this country. Trump knows this, his constituency knows this and heaven help us if Washington refuses to turn back this plague that benefits the few at the cost of many. Vote Trump

  • Johnny says:

    Either Trump or Cruz will be a Great change in restoreing plans for a come back from the pas 8 years of Hell

  • Jack says:

    Why the overt bias against Trump? Quoting all the liberals and establishment figures is totally unconvincing and makes me wonder about “Absolute Rights”…a LOT.

  • Eve says:

    Are you dense? You didn’t noticed that we are already in Recession, ? When Barak leaves office, then the SHTF . He is hanging on and don’t let a cat out of the bag, till he leaves, that way ,nobody can blame him for all the trouble we are facing since he took office. He can blame Trump, or who ever .

  • David Bosley says:

    Obama and Congress will have left this country in shambles. Trump will pull this great nation back together once again.

  • Lonnie Leverich says:

    I believe with his business mind, business will be able to remain HERE, with investment dollars for OUR nation, not China or Mexico. Closing the border will help the job market for AMERICANS. The list goes on.

  • charles says:

    Doesn’t matter who gets in office, there will be another recession.

  • Robert Camp says:

    I would worry more about Ted Cruz with his Goldmen Sacks Vise president wife!
    These trade agreements Have lost how many jobs? It shows what side you are really on and it isn’t the peoples side. With this you have really showed your colors!

  • Name says:

    He’s talked about getting better deals through negotiation,not giving away the farm like the politicians have done. BETTER DEALS

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