The "first show" of the Trump Congress is just around the corner, is the market ready to take a "roller coaster"?
Huitong.com, February 28th - US President Trump will deliver an important policy speech at the joint meeting of the Congress on Tuesday evening (February 28), detailing its tax cuts for the middle class, simplifying the tax system and improving Plans for international competitiveness of US companies. But now the market is beginning to worry that Trump's Congress "first show" may be disappointing.
In the previous campaign, Trump made a good promise to make the US average annual economic growth of more than 3.5%. Given that the current Trump market is no longer superficial, the practice of “painting cakes to fill the hunger†is no longer sufficient for investors, and the market needs Trump to do more to deliver on its promises. Trump’s speech on Tuesday night included content related to US manufacturing incentives and increased defense spending. In addition, he is expected to talk about the abolition of the Obama Health Care Act, but the market is most concerned about Trump's tax reform plan.
Trump may disappoint the market
Peter Boockvar, chief market analyst at Lindsey Group, said investors will look for clues about new government tax reforms and deregulation measures, and the market has been looking forward to tax cuts and deregulation. Measures. But Trump may let the market and investors eat a hollow dumpling and let them down. He believes that Trump will not publish many details at the meeting. 
Trump said on February 9 that he would announce a tax reform plan within two to three weeks. Huitong.com quoted foreign media as saying that until last weekend, the market had considerable expectations for Trump to provide a blueprint for its tax reform plan. But US Monetary Secretary Steven Mnuchin’s remarks in an interview with CNBC on Thursday (February 16) "stained a cold water" on these expectations. Nuchin said that Trump has not made a clear statement on the border adjustment tax. In the House of Representatives' tax reform proposal, the border adjustment tax is the largest source of taxation and is expected to tax more than $1 trillion in the next 10 years. It will tax all imported goods entering the United States at a rate of 20%, but will not tax the exported goods.
Nuchin said that the US economic growth target is 3%, and the tax reform and the main target of this tax cut are enterprises and the middle class. Nuchin also said that Congress is working hard to pass a major tax reform bill before the August recess, but this time is later than many investors hope.
Marc Chandler, head of global currency strategy at Brown Brothers Harriman and associate professor at New York University, points out that Trump’s speech will definitely affect the dollar. For example, if his wording sounds biased towards trade protectionism, it could push the dollar higher, but in the long run, a substantial trade protectionist policy could be negative for the dollar.
Chandler said that if Trump talks about trade protectionism, then the dollar will initially rise, because this implies to some extent that the United States has stronger economic growth.
Will the Trump speech be kept confidential?
Trump has not made a clear statement on the border adjustment tax. In the House of Representatives' tax reform proposal, the border adjustment tax is the largest source of tax revenue and is expected to tax more than $1 trillion in the next 10 years. It will tax all imported goods entering the United States at a rate of 20%, but will not tax the exported goods. Some analysts believe that once the above taxes are adopted, the dollar will rise sharply. Some analysts believe that the dollar may skyrocket by about 25% to alleviate any inflationary pressure caused by higher costs of overseas goods. If Trump agrees to the plan, then the possibility of a House tax reform plan being passed may be even greater.
Chandler admits that if Trump does not talk about border adjustment taxes or that the plan is too complicated, then the dollar may be sold off. The market hopes to have something special to replace the Obamacare reform law next month. If this matter progresses, then the tax reform may be completed in 2017. What content will Trump use to replace the Obamacare reform law? People are still unknown.
Dan Clifton, director of policy research at Strategas, suspects that Trump will definitely say that he wants to invest in infrastructure, and he has to find ways to lower the tax rate. But he will not consider how much it will cost to do so.
John Briggs, head of strategy at NatWest Markets, said that for Trump, people should not have too much hope. According to the FX678 report, Trump even said that the official budget report will not be released before March 14, so it is expected that Trump's speech will not have substance.
On Monday, Trump announced a budget focused on "public safety and national security." It plans to ask Congress to approve additional defense funds equivalent to nearly 10% of annual military spending. It plans to increase the defense budget by 54 billion US dollars. Learn about the details of Trump's infrastructure program.
Trump revives problems with US financial plans
One of the big problems in Trump’s revitalization of the US fiscal plan is that it will increase US debt, but it will not increase US income. This will have a negative impact on the US bond market, causing people to sell bonds, which also means that yields will go higher. John Briggs said this would put upward pressure on long-term bond yields. In the future, a large number of bonds may be issued, and the possibility that the curve continues to steepen is increasing. Ten-year and 30-year government bond yields may continue to rise.
Trump had a rare positive assessment of the border tax last week, saying it could increase employment in the United States. He also said that he supported some form of border tax, and Trump’s sudden face caused speculation. Nuchin said that American companies have a different attitude toward the border tax proposal. Huitong.com reported that the United States has called for a reduction in corporate tax from 35% to 20%. Both retailers and businesses believe that corporate tax is a potential tax on consumers and can lead to inflation.
George Goncalves, head of US interest rate strategy at Nomura Securities, said that although the details of the Trump tax reform are still unclear, the market is still looking for some clues. If you can know what will happen next, when will happen, then people may be at ease. If the proposed plan is unrealistic, then the yield of the national debt will fall.
Gonzalez said that the market trend needs to be positioned according to the details. The 10-year bond yield was 2.36% on Monday, and the surge in the Fed’s rate hike expectations in March is also part of this phenomenon. The S&P 500 Index and the MSCI World Index have not fallen more than 1% for 91 consecutive trading days, the longest record in eight years.
Dan Clifton said he has little confidence in Trump's 2017 big infrastructure plan, and Trump will "pay down" for his infrastructure plan in 2017, and by 2018 he will make A bigger plan. According to FX678, the United States has been paying attention to the construction of energy infrastructure, and less attention is paid to road infrastructure.
In addition, Dallas Fed chairman (Robert Kaplan) Kaplan said in a speech on Tuesday that the Fed is approaching inflation and employment goals, and action should be sooner rather than later. Earlier, the United States Philadelphia Fed President Patrick Harker pointed out that it is expected to raise interest rates three times this year, and should not rule out the possibility of a rate hike in March.
What will Trump say when he delivers an important policy speech on Tuesday night? What surprises will he have? Everyone will listen to it when they arrive.
Long Sleeve Men Polo,Reflective Long-Sleeve Shirt,Office Uniform Shirt,Plain Dyed Shirt
Shaoxing Xiaotrain Imp.&Exp Co., Ltd , https://www.xiaotrain.com