“Markets this year are all about how people respond to the ‘hyperactive’ Donald Trump,” reckons John Redwood, the Tory MP and strategist at Charles Stanley. At the moment, Redwood reckons people “like what they are hearing” about “big tax cuts” and increased spending on infrastructure.
In the medium term, there are likely to be “big changes” as Trump follows his aim of “making American great again”. His priorities will be to “‘onshore’ a lot of business, attract a lot of investment into America, cut the very large balance of payments deficit that the US has been running and increase wages”, as well as “restrict migration”.
Trump also wants to “change the way that America does trade deals”. That’s good news for the UK, as he has already signalled his eagerness to do a deal with Britain as soon as possible. As a result, Redwood is optimistic on the outlook for the British economy, which is “doing better than experts predicted”. Despite “gloomy” reports from various companies, shares have been “lively” as recent data suggest that sales, consumer confidence and investment are still growing.
The housing market “remains strong” with rising numbers of houses being built. However, other countries may fare less well. Europe faces “a series of difficult elections”, while the Chinese face the challenge of moving from an export-orientated manufacturing economy to one focused on services and consumption. Redwood thinks part of this shift will inevitably mean “the closure of many steel works and mines”. However, while China’s economy will inevitably slow, it should still be able to maintain growth rates of 5%-6%, and so is unlikely “to be the source of a global collapse”.