London/New York: US President Donald Trump’s much-anticipated debut address to Congress was light on policy detail and big on rhetoric.
Trump restated his key campaign themes, issuing a rallying call for the “renewal of the America spirit.” Wall Street will have to keep waiting on specifics of the plans for tax cuts, infrastructure investment and regulatory reform that have helped drive a global rally since the November election.
Here’s how analysts are reacting to the speech:
Sean Darby, chief global equity strategist at Jefferies Group LLC
“Getting approval for changes was always going to take time, but the real question is whether the absence of details causes the market to worry about procrastination.” “The core theme remains ‘US’ over ‘international.’”
Citigroup Inc. head of emerging-market economics David Lubin
“In my view, last night’s empty speech may create some exhaustion in global risk in the short term, but that may be shallow given the underlying trends in the global markets and the still highly supportive US economic data.”
“The speech, albeit positively conciliatory, offered very little detail on any potential fiscal plans, especially on the tax side. Nothing on the feasibility of cross-border taxation. Nothing on plans to expense capital expenditures, very limited details on the exact timing of the infrastructure investment plan. All in all, that should leave investors with a bad taste in the mouth when it comes to fiscal prudence.”
US economists at Nomura Securities International Inc., led by Lewis Alexander
“Broadly speaking, President Trump did not materially resolve key uncertainties regarding the outlook for economic policy.” “We believe it will take many months before we have clear answers to all of these issues.
“President Trump indicated that he plans to lay out priorities for the repeal and replacement of the Affordable Care Act. This has proven a difficult challenge for the Republicans in Congress. The failure to implement ACA changes has been an obstacle for the rest of the president’s legislative priorities, including tax reform. The current replacement conundrum should serve as an important message to markets: getting President Trump’s major spending and tax initiatives through Congress may be more challenging than expected.”
Jim Reid, Deutsche Bank AG strategist
“The president returned again to the subject of rebuilding infrastructure, highlighting that he will be asking Congress to approve legislation that produces a $1 trillion investment financed through both public and private capital and guided by the principals of “hire American and buy American”.
Trump also reconfirmed that he intends to repeal and replace Obamacare, increase defence spending, enforce immigration laws and also overhaul tax including cuts for the middle class. The tax subject was only really lightly touched.”
Paul Ashworth, chief US economist at Capital Economics Ltd
“The administration itself appears to be split on whether to support border adjustment or not, with Trump advocating a lower corporate tax rate in his speech, but not providing a strong steer on whether that would incorporate border adjustment. The conservatives in the House might also balk at any plan that adds significantly to the deficit and will fiercely oppose Federal infrastructure spending. The upshot is that, despite Trump’s upbeat assessment this evening, comprehensive tax reform is likely to take another 12 months, if not longer.”
Rob Carnell, chief international economist at ING Bank NV
“The boost to market sentiment that is likely to follow in the coming days from this speech, may well dissipate over the coming months as delay, and disappointment with what is actually delivered by Congress, begin to weigh on sentiment.” “Perhaps the key market-moving element of President Trump’s hour long address to Congress was the brief reference to the Border Adjustment Tax (BAT), which he had previously said he found too complicated… In theory, a BAT would deliver sharp USD appreciation, though the market’s response in this direction overnight may be more to do with hawkish Fed comments.”
“There were very few numbers mentioned, but the speech did reference “Massive tax cuts for the middle classes”, and did talk up big infrastructure spending, including repeats of the “$1trillion” infrastructure spending commitment. Paul Ryan did clap this, and even stood up, though maybe it would have looked odd if he didn’t, as vice-president Pence did so. Perhaps Paul Ryan’s smile was a little more forced at this point…you decide.”
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