Trump Economic Plan May Have Currency Repercussions

Trump Economic Plan May Have Currency Repercussions

Republican Presidential candidate Donald Trump’s August 8 economic speech was panned by many beltway pundits. From Nomura’s perspective, the policy speech was interesting by what was not said. If Trump is victorious it could lead to interesting impact in the currency markets, a report from Nomura’s Global FX Strategy analyst Bilal Hafeez pointed out.

trump photo
Photo by PeteLinforth, Pixbay

Trump links jobs to trade, negatively correlated

Numerous investing themes loom on the other side of Trump’s economic plan. Understanding the investment potential might be best judged by considering the word cloud that was created in the wake of the August 7 speech in Detroit.

Nomura pointed out that jobs were the major focus in the speech, followed by Hillary Clinton, trade and taxes.

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From Trump’s perspective, jobs and trade are two concepts that go hand in hand. The available data on the issue of trade deals costing Americans jobs has been mixed and is a highly charged issue. A recent plan by the Obama administration to eliminate the tracking of job loss due to trade agreements only makes accurate statistical analysis of the issue, currently the hot topic on the campaign and key for the economy, more difficult.

Trump economic speech world cloud

Trump didn’t mention building a wall, Mexico or even China much

Trump addressed eliminating the Affordable Care Act (Obamacare) and asking US allies to pay more for military support.

In somewhat related topics for currency prices, Trump addressed reducing corporate tax rates to 15%, ending inheritance tax and applying a one-off 10% tax for US companies to bring foreign cash back to the US. He also didn’t back down his talk on trade and tariffs. Hafeez noted that Trump called for a renegotiation of NAFTA, tariffs on countries that subsidize their exports and tougher enforcement of intellectual property rules, with a particular eye towards China.

These issues could have ramifications for the floating price of currencies.

“From a currency perspective, the most critical policy would be the trade (and military) ones, which would likely adversely affect the currencies of the US’s trade partners,” Hafeez wrote. “The other relevant policy would be the repatriation of foreign US cash. The FX impact of this would depend on whether the foreign cash is in dollars already or not.”

In other interesting developments for potential investments, he appeared to de-emphasize the need to rebuild infrastructure, placing this at the end of his speech, and downplayed Mexico, mentioning it only twice. Martin Marietta Materials stock price, considered a Trump proxy stock, is trading up nearly 2 points after the speech.

Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)
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