UBS: Will President Trump’s policies move markets?

America’s 45th president was moving markets even before he took office. US equities rose in the first five weeks after Donald Trump’s election win. But while the new commander-in-chief has hit the ground running since his inauguration with a spate of executive actions, the most important changes of the administration’s legislative agenda will require more than just the stroke of a pen. So how might Trump’s policies impact investors over coming years?

Trump has outlined a packed policy agenda, with initiatives ranging from defense spending, corporate tax reform, regulatory relief, and an infrastructure build-out. With such an ambitious platform, compromises will need to be made and investors are already eager to see how the administration and Congress will add flesh to the bones of Trump’s campaign pledges. While the devil will be in the detail, CIO believes key policy initiatives could boost US GDP by 0.5% and add an incremental 5–15% to S&P 500 earnings per share over the next few years.

A key investor focus will be tax reform, where Congress will need to strike a careful balance – lowering headline tax rates without causing an excessive rise in government deficit or disadvantaging certain industries. The proposal for a “repatriation tax holiday” could help by widening the domestic corporate tax base and helping pay for modest cuts to taxation rates. However, a lack of politically palatable options to generate revenue in other areas limits the opportunity for more significant measures. These challenges are the focus of our POTUS 45 report, The outlook for tax reform.*

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