Donald Trump’s political ride has been anything but predictable. But his presidency may follow at least something that resembles a script. Here’s a stab at what the next four years might look like, from an economic and market perspective.
1. His first big legislative victory will be infrastructure, with a bill north of $1 trillion that will get more Democratic votes than Republican.
2. His second biggest legislative victory will be a companion jobs bill that will combine tax credits and a slew of other measures aimed at closing the skills gap.
3. There will be no Muslim ban. This was a silly, hollow campaign promise. If you believed it, time to get a grip. (OK, we threw in a non-economic prediction, but this is important.)
4. There will be a wall, some kind of wall but Mexico’s only going to “pay” for it through restructured trade agreements.
5. The North American Trade Agreement will look considerably different by the time Trump leaves office.
6. The Trans-Pacific Partnership is toast, but it could be replaced by something similar with provisions Trump considers more U.S.-friendly.
7. But there will be no “trade war.” Nobody, including the United States, can afford one, and money always supersedes ideology on the international stage.
8. Inflation will start to kick in around mid-2017. By 2018, it could be north of 4 percent, maybe even pushing 5 percent.
9. The Dow will take out 20,000 by the end of 2017.
10. Economic growth will surpass 3 percent in mid-2017, where it will stay through mid-2019.
11. Gold will reclaim $2,000 an ounce sometime in the first two years of the new administration.
12. In late 2017, the Fed again will have to move the “dots,” but in the other direction. The Fed forecast for 2018 will include at least four rate hikes; actual policy actions in 2019 may be even more aggressive.
13. A furious Trump, worried that Fed tightening will tip the country into recession and ruin the economy for the self-proclaimed “King of Debt,”will not reappoint Janet Yellen when her term expires in early 2018.
14. For a guy who wanted to “drain the swamp” — meaning, not appoint Washington insiders to important posts — the next central bank head will be a familiar Wall Street name.
15. Yellen’s departure will be accompanied by one or more high-profile resignations from Fed members who resent Trump meddling with monetary policy.
16. Hello bear market in 2018. Economic growth will continue, but valuations are valuations, and by then stocks will become too stretched to sustain. Combine that with a considerably more aggressive Fed, and the market is going to have to re-price. Good news: It probably will just be a cyclical bear.
17. Election year recession in 2020.
18. To fight the recession, Congress will pass more stimulus and the Fed will roll out QE4.
19. Trump faces a major election challenge — from within his own party, and to his right. The 2020 election will be brutal. Will Trump survive for another term? Nope, not going there.
