In a world…
What would a world with Donald Trump as a US President look like? And more importantly here, how would it materially affect the way property investors run their respective businesses? I’ve been contemplating these two theses as the Trump juggernaut rolls through this Summer of Presidential Inconsequentiality. And my conclusions shouldn’t really surprise most pundits – or experienced property pros either. Basically, I have concluded that, for all his bombastic behavior, he’s all sound and fury…signifying nothing (sorry, Shakespeare).
Trump as cheerleader for domestic economic growth
While somewhat debatable, I think most would agree that lower unemployment in general tends to yield a more robust housing market. Employed folks are more prone to take out mortgages, and look to move to their “next” home – affording families a step up in the process. This is part of the American Dream. Any chink in the chain, as it were, will tend to break the model down. As the Dow rolls like a roller coaster, businesses tend to act more conservatively, creating a ripple effect in the economy, as job security is place in jeopardy en masse in an extremely macroeconomic way. The result: a skittish economy, with the hallmark being a “frozen” worker mentality of hold onto what you got, hunker down, don’t make waves. And whatever you do, do not take on a new, larger mortgage. The net effect has a chilling effect on the national economic picture, as the depressions years from 2009 to 2012 truly showed.
What can Trump do?
Can Trump steer the economy to a positive, cheery disposition? Well, as a cheerleader, possibly. But don’t expect him to really understand the true workings of the Federal Reserve Bank. His biggest decision would certainly be his choice for Fed chairman. He claims to know who best to place in positions of power…I’m not convinced, based on his track record in business, if that is necessarily true. Ultimately, I really don’t feel he – or any other potential candidate for that matter – will singlehandedly be able to somehow change the course of the US economy. Business cycles tend to run independent of politics. Even with a Republican President and a Republican Congress, you still have that pesky Democratic majority in the Senate to contend with. More gridlock? I think that’s assured…
Trump as tax code reformer?
While I think Trump can create a more positive spin for our economy due to his bluster (as opposed to a candidate that appears catatonic by comparison…well, yes, Ben Carson does come to mind), I don’t think he can change the course of any true business cycle. And I certainly don’t feel he will be a champion of heavy changes in the tax code that will place the well-off in any serious mode of panic about higher tax rates for the rich (despite his bombast to the opposite). With these two components in mind, I truly believe he will have little effect on interest rates. They will most assuredly be going up very modestly within the next three to six months with the aid of the Fed. But by next year’s election, rates should be stabilized for another year. I do not believe Trump, or any candidate in either party, will be able to unilaterally create an environment of lessening of national regulations from the Frank-Dodd Act for banking institutions. Thus, look for current tight credit to remain rigid overall nationally for mortgage seekers…including property investors.
Taking his act on the road…
While Trump may be entertaining as all get-out, I (along with most political experts) think his buffoonery will ultimately do him in. The honeymoon with the American public can last only so long, after all. The “act” that is his actual boorish personality will get old. It won’t get old fast. It’ll just get old…in a slow, grindingly offensive way. I wouldn’t be surprised if a candidate not currently in the race now in either party suddenly pops up within the next few months (and I don’t mean Biden). Regardless, the institution of the American Presidency is only a figurehead nowadays…a giant cheerleader for the country. Save for appointments to the Supreme Court, there is simply not as much power imbued in the Presidency nowadays compared to past decades in US history. And certainly, the US economy is a train that the President tends to have little control over of late.
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