Trump, 100 days and the 10 post-election scenarios
- April 29 marks 100 days of Donald Trump's tenure as president
- First 100 days has seen some dramatic about-turns in Trump policy
- Trump has been knocked back on healthcare reform
- Foreign policy has perhaps seen the biggest changes from campaign pledges
- On October 25, we outlined 10 scenarios that could happen under Trump
- Read more on our dedicated US Election page here
Hand on heart, you won't see me change my mind. Photo: Shutterstock
By Martin O'Rourke
Approximately six months ago, we wrote a piece looking at the potential impact of a Donald Trump presidency and ten possible scenarios that could arise if he emerged victorious. Confounding the polls, if not all of Saxo Bank's experts, Trump walked away with the main prize on November 8 stunning the world and setting the US on a path that few know where it will end.
April 29 marks the first 100 days of Trump's presidency and what a whirlwind 100 days it has been. Trump's healthcare reform package was beaten back before it even got to congress, his tax reform plans are seemingly on hold although he could yet pull a rabbit from the bag later today even if it is at a $2 trillion cost to the national debt, and his travel ban on citizens from seven mainly-Muslim countries to the US has set him squarely against the US judiciary. And that's just the domestic front.
In the international arena, there has been a stunning about-turn in strategy leading to intervention in Syria, US aircraft carriers setting anchor off the Korean peninsula (or not as the case may actually be) and oscillations in key relationships with foreign countries and international institutions that has had many scratching their heads.
While some of those 10 scenarios we highlighted had a far longer timeframe than 100 days, it is nevertheless a useful barometer of Trump's first 14 weeks to assess the impact of a Trump presidency and what we might be able to glean for the remainder of his term (just 3 years and nine months or so to go!).
On each scenario (with the exception of one) we gave a probability rating and republish in full.
1. Mexico's peso to plunge
Probability rating: The peso will plunge, but it is just a question of how far. We give it an 8/10 chance of hitting a new all-time high and going through 20.0.
It was a no-brainer of course that Mexico's peso was going to slide if Trump won and on January 19, the day before Trump's inauguration, USDMXN duly hit a close high of 21.955. The fortunes of the pair effectively became a proxy for the US election climbing from around 15.50 in the summer of 2015 when Trump announced his candidacy to 18.594 on the eve of the election. It closed November 9 at 19.844.
So far, so good as far as our probability rating is concerned. The more interesting development, however, has been the course of USDMXN since January 20. A strengthening peso would not have been a surprise given the fluctuating nature of market-moving events, but to see the peso at 18.95 Wednesday (0739 GMT) is perhaps not at all what the markets expected.
Washington's relations with Mexico are certainly at an all-time low with Mexican president Enrique Pena Nieto cancelling a meeting with Trump in January. But, as the dust begins to settle, the limitations of Trump's power domestically have started to show (we will treat the USDMXN as a domestic issue here given the Mexican wall furore and Mexican immigration into the US) and that has seen USDMXN back almost exactly at pre-November 8 levels.
Trump on April 24 also signalled that any move on the Mexican Wall could be delayed for months as the government faces more pressing issues, namely the shutting down of the federal government if he isn't willing to play ball. Nevertheless all the companies that we speculated could gain from the wall's construction are sharply up from one year ago -- Cemex SAB (+100%), Granite Construction (+40%), Tetra tech (+50%), Caterpillar (+30%) -- with the exception of Fluor which has seen a slight year-on-year decline.
The limitations of Trump's power is a theme we will be returning to again and again here.
MXN angst was at its highest on January 19
2. And it's a jump to the right
Probability rating: The lurch to the right is a certainty (9/10), but a weakened UN will limp on. We rate the latter's ultimate demise as a 2/10 chance.
Strategic impatience rules the day. Take note Obama.
Le Pen and the anti-establishment communist Jean-Luc Melenchon together garnered 40% of the vote on April 23.
3. Yellen's days are numbered
5. Media polarisation
Probability rating: It's already happened and is only likely to get worse whoever wins.
We live in a dangerous age where we seek only affirmation of views that we already hold. Social media has helped exacerbate that process as entrenched camps spread the word through various channels, as long as that word fits with their core beliefs.
Oddly enough, Trump may constantly dismiss the pillars of the media establishment like The New York Times and CNN, yet is known to be an avid watcher of CNN. Know thine enemy?
Whatever his motivation, the inability to conduct debate in a reasoned and tolerant manner respecting the right of others to have different and possibly antithetical views is not conducive to democracy. The sooner we can return to normal discourse without hurling insults at one another, the better. Opinion is, after all, opinion, no? Branding differing views as 'fake news' has become a lazy insult clouding the discourse.
6. The end to rigged elections
Probability rating: 9/10 if Trump wins and 0/10 if he doesn't. The myth of the rigged election will never be allowed to die if the latter scenario is the outcome.
As suspected, this one never saw the light of day again. It served its purpose nevertheless and helped the president bolster his case against the establishment. Nigel Farage performed a similar trick last summer to help the Brexit vote over the line.
For now, the elections-rigged jibe can be best understood within the framework of vague references to America's deep state. The notion of something shadowy in the background pulling the strings is a pleasing one. At least for those unable to substantiate their case in any meaningful way.
7. An end to bipolar politics in the US
The timeframe is the key here. Trump's approval ratings hover at around the 40% mark, the lowest for an incumbent during the first 100 days. Overall, dissatisfaction with the candidates on offer was evident throughout the campaign with Hillary Clinton almost as divisive as Trump.
The tit-for-tat nature of the relationship between president and Congress over recent terms has also handicapped the legislative process in the US and fuelled disillusion with the system.
The emergence of a maverick like Trump and also the credible challenge offered to Clinton by Bernie Sanders is a step on from the Ross Perot challenge to the establishment in 1992 and there is good reason to believe that while that was a bit of a false dawn, a less bipolar breakdown of the US political spectrum is on the cards.
8. Improved relations with Russia
Probability rating: 9/10 if Trump wins and every possibility that within two years, hostility between Moscow and Washington might be at its worst at any time since 1985.
There's always one isn't there? We did carefully caveat this one though as the text in the probability rating makes clear, although not even we expected it to turn quite as quickly as this. It is fair to say nevertheless that relations with Moscow as things stand are every bit as bad as 1985 and perhaps worse after the bombing of Syria earlier this month to take out an airbase that launched a chemical attack against civilians at the behest of the Russian-backed regime of president Bashar-al-Assad.
Trump's about-turn on intervention could be seen as a genuine reaction to the horror of that particular attack or as a neat diversion to failures on the domestic front with the healtchare package in abeyance and tax reform plans also seemingly thwarted (allowing for what unfolds today). Likewise, the sabre-rattling off the North Korean peninsula fits with a gung-ho, WWE type of politicking that will appeal to a certain kind of Trump voter.
The cost has been the end of Washington's seemingly cosier relationship with Moscow and that has only been exacerbated by Trump's reaffirmation of the importance of Nato after questioning its role during the campaign. Even the pivot towards the European Union evident in Trump's abandonment of efforts to strike bipolar agreements has undermined the Moscow/Washington relationship.
A final shift in the chess pieces has also seen the US once again reassess its relationship with China and forge closer links with Beijing. The charges of currency manipulation have been dropped and there is every chance this will see Washington cooperate more closely with Beijing than Moscow in the future, a scenario few could have predicted at the end of 2016.
The summit between China's president Xi Jinping and Trump at the start of this month was a considerable success and that once again threatens to leave Russia isolated on the international stage with a Trump/Xi understanding over hotspots like North Korea beginning to form.
US benchmark WTI was at $44.89/barrel on November 7, 2016. It has since peaked at $54.45/b on February 23 and was just below $50/b on April 26. While that is hardly a case for saying oil has rocketed, a risk premium has most definitely wormed its way into markets on the back of elevated geopolitical risk.
With a glut of supply still the prevailing characteristic of the market despite the Opec/Nopec deal on production cuts, WTI's approximate 12% rise since November 7 (as of April 26) indicates this is live.
Gold levels went into the election at the highly elevated level of $1,282/oz and in the aftermath of Trump's triumph, the so-called risk-on supportive Trump trade sent the precious metal down to around $1,130/oz. But the seeming suspension of his tax reform plans and a certain vagueness as to how Trump would set about putting together his $1 trillion stimulus package allied to the risk premium took gold to $1,290/oz last week.
Gold has since slipped to below the $1,270/oz mark, but the bias remains upwards long term, given the unpredictability that has coursed through Trump's brief reign.
Bitcoin has perhaps been the biggest surprise having gone from $704 on November 7 to $1,282 on April 26, according to Coindesk.com. We charted that rise already at the start of the year on the basis that investors might look to spread their portfolios as widely as possible. Why Bitcoin is so high is a bit of a head scratcher and it can fluctuate wildly, but the fact remains that the cryptocurrency is making a serious comeback and is now beyond those peaks of December 2013 that attracted so much attention.
10. May and Merkel to keep their distance
We didn't actually produce a probability rating this one as we were being flippant for reasons we do not need to detail. In reality, Theresa May tripped over herself to become the first foreign leader to enter Trump's domain at the end of January, even holding the president's hand in the process.
May's haste was of course a product of the UK's horribly exposed position internationally which will ultimately see it outside the EU by the first quarter of 2019. Her efforts to at least begin the discussions on a trade deal between the US and the UK certainly got a sympathetic ear from Trump at the time, but his crash course in the realities of power has taught the president he will have to deal with surpranational organisations like the EU whether he likes it or not, and that has seen Britain slip in the pecking order from first position to who knows where.
May's desire for a summit has been in marked contrast to Angela Merkel who sat and watched from the sidelines as Trump cast doubt over the German chancellor's relevance, dismissing her as someone who had been a great leader.
When the two did actually meet last month, a bizarre and ill-timed joke on the part of the president about wire tapping was met with the disdain from Germany's leader that it deserved. The contrast between Merkel and May has never looked sharper.