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11/25/16

US Economy: Wall Street Is Suddenly in Love with Trump, now they think he is one of them - but will it last?

What is next?
Few people thought Trump could win, and for Wall Street, being caught backing a losing investment is tantamount to death. Plus, his opponent was actually quite friendly if not downright buddy-buddy with the industry.

There was also the matter of Trump saying things on the trail like: ”hedge-fund guys are getting away with murder” and ”Wall Street has caused tremendous problems for us” and ”I’m not going to let Wall Street get away with murder”.

But after a brief moment of panic, wherein it became clear Donald J. Trump, he of ”grab them by the p---y” and “I could stand in the middle of Fifth Avenue and shoot somebody” fame, would be the next president of the United States of America,

Wall Street quickly adjusted to the new reality. In fact, a lot of people are downright giddy about Trump living in the White House (during the week, anyway).

All the usual Wall Street cronies were happy: “Regulatory overreach probably peaked,” said Robert McTamaney, a former Goldman Sachs partner who helped run the firm’s equities-trading business in Asia until 2011 and now manages his own money. “It’s going to come off the boil, and you can probably cut back on the legal team and compliance.”

The impact of the rapidly changing tide in consumer confidence, though, won't be limited to just Trump and Republicans. Already, we have seen the consequence of falling Democratic voter confidence foster spontaneous, peaceful protests. Should Democrats' moods fall further, those protests will become angrier; and we will see the same divisiveness and and extremism seen recently within the Republican Party.

As mood falls, rising self-interest challenges the cohesiveness of even the strongest organizations.

Throughout the 2016 campaign, one could watch as falling confidence split support between Hillary Clinton and Bernie Sanders. If Democrats' confidence remains low, it would not be at all surprising to see even greater divisions form. Based on what I see, a young, leftward leaning, heretofore unknown leader could easily emerge as the new hope of the party — an anti-Hillary Clinton Democrat, as it were.

While Elizabeth Warren is receiving all the media attention now, if mood stays low, the spotlight will almost certainly move on to a true outsider. For the Democratic Party, the outcome of the 2020 election will rest squarely on the party’s ability to pull together young voters in opposition to the Trump presidency.

While admittedly very early, one can expect anti-Wall Street/anti-capitalism sentiment to play a major part, particularly given Trump’s business pedigree. While economists will likely look at the post-election surge in confidence as a reason to expect strong holiday sales,  don’t count on that.

Rather than reflecting the improving financial condition of American consumer, the latest Gallup figures are expressing a return of hopefulness to Republican voters, offset by a mild decline in optimism among Democrats — a change in the political tide. Nothing, however, has changed in the wallets and pocketbooks of voters.

For Trump, he must now translate the "Evengelical tent revival" resurgence in confidence among Republicans into higher confidence for all Americans.

As rising confidence is the critical input to economic growth, financial prosperity and social cohesion, what happens to Americans’ mood over the next several months will drive the trajectory of the next four years. While many Americans feel better today than they did last week, many, many more need to feel good.

Right now, looking closely at the  Presidential election results one can only ask: "has the Trump election win been a silent coup of Corporate America and the Republican party, or have they been just as surprised as the rest of us"

It seems more likely Wall Street could be in for a big surprise and possibly a total meltdown of the US economy. Only time will tell. 

 EU-Digest

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