23 Mar Trump, trade and the stock market

Q. How will Trump’s trade policies affect our stock market? Most of my money is invested at home.
— Trying to keep up

A. Indeed, there are lots of Trump-related headlines, and amateurs and pros alike are trying to figure out what it will all mean.

It is tempting to read a lot into Trump’s views on trade and make investments that respond accordingly, said Andy Kapyrin, director of research at RegentAtlantic in Morristown.

But, he says, he believes there’s a lot more nuance to the president’s views than the headlines let on.

“Many view his administration as hostile to global trade, but the nuance is much more specific,” Kapyrin said. “Trump believes that multilateral trade deals are not a good bargain for American firms on the whole. He believes that bilateral deals will benefit American producers more.”

Plus, Kapyrin said, there has been talk in Washington about a border adjustment tax, which would favor more production in the U.S. The chances of Washington passing this seem pretty remote at this point, he said.

“Irrespective of the details, the big winners among the U.S. stock market from a more export focused administration will be the large industrial firms that produce high-tech high valued exports already,” he said. “Industrial companies like Boeing, Honeywell and General Electric would benefit most from that environment.”

But don’t assume that all manufacturing firms will win.

Kapyrin said many companies have relied on existing trade deals to create complex multinational production chains.

“GM and Ford have both drawn attention from the administration for manufacturing plants in Mexico, for example,” he said. “Depending on the details of new trade policies, they may need to accept higher production costs at home and have already abandoned manufacturing plants abroad in some cases.”

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This post was first published in March 2017.