Donald Trump’s inauguration is a little more than two weeks away.
But that doesn’t mean markets aren’t already getting a bit antsy that Trump might not deliver on some of the key economic promises that have fueled the rally that followed his election.
“For the next several months, markets may have a pronounced political vulnerability — and not just to the President’s tweeting,” said Art Cashin, director of floor operations at UBS.
“They need to get to tax reform,” Cashin added. “Many corporate executives may hold off key business decisions awaiting clarity on taxes. That could hurt the economy. So it’s time to tee things up.”
A few things to note. On the one hand, Cashin is sending a message from the floor of the New York Stock Exchange to Washington and the incoming administration that markets are waiting for action on tax cuts, but won’t wait much longer. Taxes, as we’ve written before, are the number one issue markets are concerned with heading into 2017.
The other side of this is, at the same time, a cautionary signal to markets that even if tax reforms are passed, real business changes might come through on a significant delay. A soft patch in early 2017 could come ahead of corporate tax moves slated to kick in next year. This would be the short run hit to the economy Cashin is warning about.
Because even with knowledge that economic weakness is coming ahead of a boost to earnings and growth next year, markets could get jittery if hard data comes in below what business and consumer surveys have indicated in recent weeks.
In markets, sentiment is a fickle thing. And as stocks have sat in a fairly narrow range over the last couple weeks, we’re at the edge of seeing some doubt creep into markets which, for a few weeks after the election, took any and all Trump platforms as both 1) good and 2) likely to breeze through Congress.
In a quick note out Tuesday, Deutsche Bank’s chief international economist Torsten Sløk circulated a list of the 30 issues for investors to contend with in 2017. No fewer than 8 of these issues are directly related to Trump’s potential economic initiatives. And nearly all of them are in some way related to the president-elect.
Some will argue it’s nonsensical for market observers to remark, on January 4, that Trump hasn’t done enough on the economy to warrant continued faith that his plans will pan out. But the post-Trump rally was, again, based on a (probably unrealistic) view that everything would go smoothly.
And given the Twitter diplomacy carried out by Trump on Congress’ first initiative in the new year, it seems clear there might not the kind of complete and total agreement between Congress and White House some in markets may be planning for.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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