President Trump gave a much anticipated address to a joint session of Congress. The speech was tilted heavily towards nationalism. But what are the market implications?
Here is their view, courtesy of eFXnews:
Markets have been hungry for more details surrounding President Trump’s legislative plans, but his speech to a joint session of Congress didn’t provide much new meat to chew on. The theme of his communications continued to be one of ‘America First’, and early on in the speech he touched on ways in which the country has lost as a result of free trade. That said, there was only a vague reference to the possibility of a border tax. While the President did directly pledge to lower corporate taxes, something that could come in conjunction with a border adjustment tax, there were no specifics. Trump also stated that he was going to lower personal taxes for those in the middle class, but there were no further details here either. The plan he outlined as a candidate was heavily tilted toward higher income earners, and therefore much of it would be saved rather than boosting consumption.
The ‘America First’ theme could be found in his comments regarding industry as well. On infrastructure, he proposed a $1 tn package which would include both private and public funding, and would stress both ‘Buy American’ and ‘Hire American’. Moreover, he said the energy pipelines that he hopes to see built should use only American steel. He also mentioned that deregulation will be a priority for his administration, and reiterated how it was going to help the domestic coal industry.
Trump spent the latter part of his speech on the military. While he pledged to increase defense spending, we expect that to be offset by budget cuts elsewhere. As a result, we are still cautious on the amount of fiscal stimulus forthcoming over the next couple of years. Importantly for Canada, the President reiterated his desire to see other NATO countries fulfill their spending commitments. Canada currently does not meet the 2% of GDP target spending, but Prime Minister Trudeau has stressed the importance of the country’s non-financial contributions to the organization. Nevertheless, defense spending is an area worth keeping an eye on in the upcoming Canadian Federal Budget.
All told, President Trump painted only a slightly clearer picture in his speech, and markets will continue to await further details for more direction.
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