Dawn J. Bennett, founder and CEO of Bennett Group Financial Services and host of Financial Myth Busting with Dawn J. Bennett, recently wrote an article titled, “An Era of Black Swans,” in which she discusses Donald Trump’s election to the White House and what it could mean for the future of the markets.
“To the shock of pundits and prophets alike, Main Street once again voted with its pocketbook and swept a black swan Donald Trump presidency into the White House,” wrote Bennett. “Not only did he win, but he brought in many of the Reagan Democrats and nearly half of the union voters, and against all odds, he even seemed to have coattails.”
She continued, “Even among supporters of Trump, though, there is an undercurrent of unease. Can he make the transition of what former New York governor Mario Cuomo called ‘the poetry of campaigning’ to the hard work of the ‘prose of governing?’ Will the Trump of previous years, the one who in 2012 called Mitt Romney’s policies on the deportation of illegal immigrants ‘maniacal’ and ‘mean-spirited,’ return one the dust has settled, or will he maintain the course he set during the campaign? Can President Trump, could any president accomplish want really needs to be done to heal the economy and security of this nation and its people?”
The best case scenario is for Trumponomics to be a Reaganomics 2.0 and rebuild the economy through reduced regulation, sensible tax cuts and spending on infrastructure, according to Bennett. However, she says there’s a wide period of volatility and risk that lies between us and that desirable outcome. The nation’s significant public and private debt, years of quantitative easing and near-zero interest rates, and policies that have obfuscated the basic fundamentals of the economy still exist. Trump’s election means Yellen and the Fed no longer have a personal or political incentive to keep the economy and markets in “suspended animation.” Bennett says we can expect interest rate hikes, which will have bad consequences for the short-term market.
Some of Trump’s policies won’t come without their own painful consequences, either, says Bennett. Trump said he intends to force American businesses to repatriate manufacturing jobs, which would be an effective tax on corporations like IBM, Apple and Nabisco. But, until the consequences of these policies are normalized and written into the market, it could result in a 10 to 20 percent drop, according to Bennett.
Despite the current state of the nation and the economy, Bennett says Donald Trump has the potential to be great, and she hopes he is.
“American truly needs great leadership in a moment that presents a once in a lifetime opportunity for paradigm shift, the kind of leadership that was promised eight years ago but never materialized,” says Bennett. “Yes, I hope that our next president will find a way to work with his own party and those across the aisle. I hope that his agenda will materialize in a thoughtful and straightforward way.”
She continued, “But, in the meantime, there’s a bumpy ride coming, Protect your savings, diversify not just in terms of asset classes but in terms of geography. Look into assets that preserve wealth in the face of increasing volatility and risk. And God Bless America.”