When parsing the potential effects of a Trump presidency on markets, it’s a lot easier to frame the positives (tax cuts, regulatory relief, infrastructure) than to scope out the extent of the negatives (trade repercussions). Markets are pricing in a big net plus. Is that reasonable?
Tax cuts and regulatory relief should be easy for a Republican president and Republican Congress to agree upon. While many argue that a large infrastructure program cannot be paid for in the midst of extensive tax cuts, this rules out the possibility of financing most of these infrastructure programs from public-private partnerships (PPPs). One of the world’s biggest problems right now is that too much capital is chasing too little EBITDA. Why not help drain some of the global savings glut and associated liquidity trap by inviting the capital markets in to finance infrastructure like the Australians do? US banks are also in good shape to finance these programs, with historically low loan-to-deposit ratios of only 72%.
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