The American stock market rallied sharply after Donald Trump's election as the forty-fifth U.S. president. Trying to precisely explain short-term market movements is often a fool's game, of course. Still, many investors credited the outbreak of bullish behavior to the shock election result. Market participants were hopeful that candidate Trump had been both serious and literal when he repeatedly promised major fiscal stimulus--tax cuts and infrastructure spending--as well as a sweeping deregulatory push, particularly doing "a big number" on the Dodd-Frank financial reform law. Certainly with Republicans controlling the White House and Congress, Trump has the means to make turn his campaign agenda into political reality.
But as one investor saw it, the market rally reflected an attitude shift that was about more than any particular policy idea or set of ideas. It was the philosophical underpinning of Trumponomics that mattered most. As hedge fund operator Ray Dalio wrote in December:
This new administration hates weak, unproductive, socialist people and policies, and it admires strong, can-do, profit makers. It wants to, and probably will, shift the environment from one that makes profit makers villains with limited power to one that makes them heroes with significant power. This particular shift by the Trump administration could have a much bigger impact on the U.S. economy than one would calculate on the basis of changes in tax and spending policies alone because it could ignite animal spirits and attract productive capital. Dalio then outlined how Team Trump might spark a "virtuous circle of investment," finally concluding with a deep dive into the pro-business ideology of the new administration. Only as an afterthought did Dalio briefly mention trade, adding that it was "worth keeping in mind that Trump's stated ideology differs from traditional Republicans in a number of ways, most notably on issues related to free trade and protectionism."
Which, to be honest, is a sort of weird take--or at least an understated one. Tramp's "stated ideology" on trade was not something that emerged in the final days of the campaign. It was a campaign mainstay from the time he descended the escalator in Trump Tower and announced his candidacy in June 2015. Most notably during the campaign Tramp suggested imposing a 35 percent tariff on imports from Mexico and a 45 percent tariff on imports from China if they did not starting trading fairly. But trade warrior...