{UAH} Allan/Gook/Pojim: We were told that the presidency was easy.......Investors turned off by Trump's protectionist talk - POLITICO
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Investors turned off by Trump's protectionist talk
Some investors thought Donald Trump's address could help boost the Dow over 20,000, but that did not initially materialize. | Getty
Dow gives back gains as new president paints picture of 'American carnage.'
Wall Street did not exactly celebrate President Donald Trump's deeply populist inaugural address on Friday, with the stock market losing some of its early gains as the 45th president spoke darkly of "American carnage" and promised a new era of trade protectionism.
The Dow Jones Industrial Average rose about 100 points before Trump took the oath of office but began slipping as the new president promised to protect the country from foreign trade. That was a signal to investors that harsh rhetoric from the campaign trail could soon be policy reality.
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"We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs," Trump said. "Protection will lead to great prosperity and strength."
The direct invocation of protectionism surprised some on Wall Street who expected a more uplifting message from the new president. Big companies that make up major stock market indices tend to benefit from free trade and could see their profits hurt by significant import tariffs.
More broadly, some analysts said Trump sounded more like he did on the campaign trail rather than as a unifying figure eager to start his tenure in the White House with a positive message.
"Overall, that was a more protectionist and nationalist speech than I expected," said Megan Greene, chief economist at Manulife Asset Management. "Rather than unifying the country after one of the most divisive elections in U.S. history, he highlighted how bad things are in the U.S. economy and engaged in scaremongering, which was consistent with his campaign.
"Analysts have shuddered at countries using an 'America First' type slogan in Europe in the past, but in this new age it has become acceptable."
The Dow was up about 70 points in early afternoon trading. The S&P 500 and Nasdaq were also just marginally higher.
Stocks initially soared after Trump's surprise win in November on hopes for big tax cuts for companies and individuals and a fresh round of stimulus spending.
Industries likely to see significant regulatory relief under Trump, notably the banking and energy sectors, fared especially well. The dollar also initially soared following Trump's win.
But those gains have slowed in recent days with the Dow staying stubbornly below the psychologically important 20,000 level. The dollar was little changed following the speech. Trump recently broke with longstanding tradition in which presidents decline to comment on the currency and said the dollar had gotten too strong.
The Mexican peso, which plunged on Trump's election over fears of new tariffs on Mexican goods, rose around 1.3 percent by midday Friday. Traders said that was likely because Trump did not mention Mexico directly during the speech, something he has done in the past.
Some investors thought Trump's address could help boost the Dow over 20,000, but that did not initially materialize as Trump painted a dark picture of a broken America that does not comport with official statistics showing a 4.9 percent jobless rate, rising wages and third-quarter growth of over 3 percent.
"Mothers and children trapped in poverty in our inner cities, rusted-out factories scattered like tombstones across the landscape of our nation," Trump said in laying out his vision of hellscape America. "This American carnage stops right here and stops right now."
The message mirrored the one Trump used on the campaign trail and that helped him capture surprising wins in Michigan, Pennsylvania and Wisconsin, driving him to 306 electoral votes and the White House despite losing the popular vote by about 3 million.
But it was not the kind of address some investors hoped to hear.
There was also a lack of specifics on policy agenda items like corporate tax cuts, though Trump did refer to the need to rebuild American infrastructure.
"Typically, you think of inaugural addresses as uplifting, big picture speeches," said Jack Ablin of BMO Private Bank. "Investors came into it worried about specific mentions of America first and confrontational rhetoric, and that's exactly what they saw."
"It was confrontational both domestically and internationally. And there were not a whole lot of specifics that investors could sink their teeth into."
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