Promises, promises… 100-day check-up on Trump's presidency
An analysis of President Donald Trump's contract with America
President Donald Trump made numerous promises to American voters during his campaign, including an immediate repeal and replacement of the Affordable Care Act, lower taxes, less regulation and an increase in government spending on defense and infrastructure. April 30 marks President Trump’s first 100 days in office, and many will start evaluating how these days and his promises, have progressed.
Why are the “first 100 days” noteworthy?
The phrase “the first 100 days” actually started as a reference to the 100-day session of the 73rd U.S. Congress between March 9 and June 17, 1933. President Franklin D. Roosevelt first used the phase in a radio address on July 24 of that year. Since then, it has evolved to indicate the first 100 days of a U.S. president’s administration and has become an unofficial checkpoint to gauge initial progress.
How does the first 100 days usually look?
Let’s start with a look back at a few other presidents’ first 100 days for comparison’s sake.
- FDR just got after it – there is no other way to describe it. He turned 78 bills into law and passed nine executive orders.
- George W. Bush passed seven laws and 11 executive orders.
- Barack Obama passed 11 laws and 19 executive orders
In fairness, one could argue that since FDR, the political process has changed, causing Congress to move much more slowly. Since 1950, Congress has passed an average of 16 laws in the first 100 days of any new administration.
Soo…. How does President Trump compare?
As of April 5, President Trump has signed 19 new laws and 19 executive orders, passing more laws than our past two presidents and matching former President Obama’s number of executive orders. But the real question is:
We all know that passing laws and signing executive orders doesn’t automatically make you productive or successful.
From a market perspective, I believe the jury is still out. Perhaps the markets are not watching how many laws or executive orders are signed, but rather if his campaign promises are being executed.
If we look at the stock market, which is a leading indicator, it is projecting a message of “so far, so good.” From Election Day through the end of the first quarter, the S&P 500 is up 11 percent, which fares well when you look at previous data over the same time period:
- Obama second term: +11%
- Obama first term: -19%
- Bush second term: +5%
- Bush first term: -19%
However, one thing to keep in mind is former President Bush and Obama’s first terms were during periods of recession. These presidents were both experiencing contracting economies, which typically lead to poor equity returns.
Based on history, one could conclude that the stock market, a discounting mechanism, is suggesting the economy and financial markets should carry on as usual.
Could broken promises derail the economy?
Clearly the underlying fundamentals of the economy are improving and the outlook for corporate earnings, which drives stock prices, is looking much more attractive than last year. In addition to improving fundamentals, there is an underlying strategy of hope that some fiscal stimulus will be executed in 2017.
But what if President Trump, who has to work with several parties--the Democrats and the many factions among the Republican Party—isn’t able to execute his contract with America?
The economy has chugged along like the little engine that could since the great recession in 2008-2009, growing GDP 2.1 percent on average, with very little fiscal stimulus. Abundant monetary stimulus, lower interest rates and quantitative easing have all been present, but fiscal stimulus has been absent. Therefore, if President Trump is unable to implement fiscal stimulus, I don’t believe it will derail the economy. We would merely continue to chug along at 2 percent real GDP growth as we have in the past, which has been acceptable for financial markets.
Bear in mind, there is a slight chance that promises not kept could be the catalyst for a market correction. Since November of last year, the markets have reacted nicely to that strategy of hope many call the “Trump trade.” If fiscal stimulus doesn’t materialize, it would only be logical that the markets give something back.
However, all that being said, our base case is that some fiscal stimulus will be implemented. The questions are magnitude and timing. Given the data we have currently, we believe President Trump is on track to create a pro-growth environment.