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INVESTMENT STRATEGY QUARTERLY

Washington Policy Update:

Is There A ‘Trump Put’ On The Market?

Ed Mills, Washington Policy Analyst, Equity Research

When trying to determine the outcome of a variety of the very real potential of a policy
Washington D.C.-related events, we seek to understand the “Many believe this miscalculation or external event
that is not within the President’s
motivation and goals of President Trump and his dynamic, while producing control. In this article, we are
plenty of volatility at times,
administration. We believe that it is important to understand represents a potential going to examine this dynamic
these negotiating tactics to best gauge the potential market ‘Trump put’ on the market – and discuss some areas where it
limiting the potential may not hold.
impact of the President’s decisions. One of the biggest negative market impact
debates we are having with investors has focused on his of his policy decisions.” WHAT DID WE
willingness to threaten actions that could have significant LEARN FROM THE
GOVERNMENT SHUTDOWN?
economic and market consequences versus the President’s
The longest partial government shutdown in U.S. history (22
repeated use of the stock market and economy as a gauge of December 2018 to 25 January 2019) highlights some of the
his success. potential risks to high-stakes negotiations for at least the next two
years. The President was willing to keep the government shut
SHUTDOWNS, TRADE FIGHTS, DEBT down in pursuit of $5.7 billion, which was a non-starter for
CEILINGS, AND MORE TO COME Democrats who saw their recent midterm election victory in the
House of Representatives as a mandate to serve as a check on the
We have seen this play out during the recent partial government President’s actions. In-person negotiations between President
shutdown and, debatably, we are seeing it with the China trade Trump and senior Democratic leaders, along with prime-time
fight. We believe this dynamic is going to be an important factor addresses and clashes over the State of the Union did not move
to consider during the upcoming policy fights in Washington, either side toward compromise, further prolonging the shutdown.
especially the need to increase the debt ceiling later this year.
The potential negative political consequences did not seem to
However, we also caution that this does not necessarily factor in
move either side and the debate was deadlocked. Ultimately, we

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