“I’m saying that the Tea Party, perhaps by another name, will soon have another big moment – and will be a major factor in victory!” Donald Trump, February 24th, 2013
We are merely financial analysts trying to decipher how events will impact equities, bonds and currencies.
Their message of fiscal conservatism and social liberalism echoed into the embodiment of the President elect.
Donald Trump is the consummate salesman and was able to tap into these sources of dissatisfaction to position himself as the victor.
How this fits into the current economic picture is unclear. How many election ‘promises’ were pandering as opposed to real actionable issues? We will no doubt find out.
We have seen much analysis on the ‘winners’ in a Trump administration so we won’t rehash but point readers to Never bet against Donald J. Trump by Ziad Abdelnour a fellow contrarian!
For our ramblings we prefer to focus where the crowd is not looking …. Asking ourselves the question:
So while the equity market is busy weighing up the winners and losers from the ‘surprise’ election (we weren’t surprised just for the record).
We are pondering the effect of a 78 basis point increase in the risk free Treasury rate on $65 Trillion of Debt Market securities.
That’s an increase of $507B in interest expense looking out 1 to 2 years! About 20% of that will land on corporate income statements.
Taken in conjunction with this analysis by our friend Garic Moran of TG Moran Capital we don’t believe the picture is as rosy as everyone makes out;
Companies who have borrowed money to buy back stock or make acquisitions while outsourcing their manufacturing are clear losers.
Domestic companies with high tax rates and are in a position to benefit from infrastructure spending are clear beneficiaries. [GS; Mid-Stream Energy?]
Best not to get over exuberant with this current leg-up in equities, but remain somewhat balanced and close to strategic weights!
Thank you for reading my post. I regularly write about private market opportunities and trends. If you would like to read my regular posts feel free to also connect on LinkedIn, Twitter or via Atlanta Capital Group Investment Management.
Greg Silberman is the Chief Investment Officer of Atlanta Capital Group Investment Management [ACGIM]. Atlanta Capital Group Investment Management specializes in creating custom private market solutions for RIA/Family Office clients.
Nothing in this article should be interpreted as a recommendation to buy any security. Please conduct your own due diligence.
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