Dow Skyrockets in Trump’s First Week
Investors have declared President Trump’s first week in office a success by pushing the Dow above 20,000 points for the first time in history. This news caps a whirlwind of executive orders demonstrating Trump’s dedication to his campaign promises. By Friday, Trump is expected to have addressed immigration, government bureaucracy, environmental concerns, and trade issues. This show of strength is being viewed positively by the business world, and stands in sharp contrast to the Dow performance after the election of President Obama in 2008, when the index went down by 4.1 percent.
Trump Cuts Red Tape
For those following the market, the most important executive orders approved after the inauguration dealt with reducing red tape for businesses. On Tuesday, the Trump team drafted a memorandum which required the Secretary of Commerce, expected to be former investment banker Wilbur Ross, to review the regulatory process for domestic manufacturers. Within 60 days, the Commerce Department is to provide the administration with a report detailing any processes which could be streamlined, in order to help manufacturers start production quicker. This should boost the number of manufacturing starts for 2017, a key part of the Trump employment plan.
Big Oil Gets a Victory
The delays affecting progress on the Dakota Access oil pipeline also appear to be coming to an end. President Trump granted all of the necessary approvals, and demanded that work begin without delay. The Dakota Pipeline should reduce costs associated with shipping oil from North Dakota to a refinery in Illinois. Native Americans protested that the pipeline threatened to pollute the local water supply and would damage nearby burial sites.
In addition, President Trump called for an expedited approval process for the Keystone XL oil pipeline, which would bring oil from Alberta, Canada to Nebraska. Opponents objected to the Keystone project primarily on environmental grounds because of the fragility of the ecosystem of the Alberta oil sands . However, Trump argued that work on the pipeline will create almost 30,000 jobs. In a related memorandum, Trump gave the U.S. steel industry a boost by requiring the steel for all pipelines in the United States to come from American sources.
Federal Government Faces Freezes
Government took a further hit with the executive orders freezing regulations and Federal hiring. President Obama pushed through several new laws and executive orders during his last weeks in office, but the incoming Congress has not approved them all. Trump’s latest directive places these laws on hold, pending a review by the new administration. As part of his promise to “drain the swamp”, Trump has also stopped hiring by the Federal government, with the notable exceptions of the military and immigration services.
International Trade Takes a Hit
Trump took a hardline on American trade by withdrawing from the Trans-Pacific Partnership (TPP) promoting trade between Pacific Rim countries. The President argued against a high level of cooperation with countries that offer lower wages. He noted that this will encourage manufacturers to increase outsourcing, without increasing exports. Several of the other 11 countries in the partnership want to restart negotiations. This could leave America out of the agreement’s favorable terms. China is also looking to join a TPP style group.
Trump Renews Call for a Border Wall with Mexico
He also signed orders directing construction of a border wall with Mexico as quickly as possible. Trump listed types of undocumented aliens eligible for deportation. Local police officers can perform the role of immigration officers. Stricter borders threaten the flow of money across the border to Mexico. These transfers are the single largest line item in the Mexican budget, accounting for almost $25 billion. Mexico may pay for the border wall, either as a direct payment, or as a tax on cross-border transfers.
How Will Trump’s First Week Affect Trading?
Trump has gained the trust of investors. Now the Dow has experienced the second fastest historic increase of 1000 points or more since its creation. Expect oil prices to stabilize, in expectation of increased flows from the Alberta and North Dakota fields. And steel prices should go up to account for increased manufacturing demand thanks to the reduced regulations. Somewhat surprisingly, the Mexican Peso has gone up despite the threats from the Trump government. Investors feel the wall will force Mexico to fight against its corruption.