The research team at Goldman Sachs is throwing skeptical about President Donald Trump’s impact on the economy.
In the weeks leading up to Inauguration Day, economists and financial experts made favorable market predictions, buoyed by expectations that Trump would quickly usher in an era of lower taxes, deregulation, and stimulus spending. The market itself experienced a historic rally that month, posting extraordinary gains, especially after Trump won. (RELATED: Here’s How The Market Looks One Month After A Trump Win)
The research economists at Goldman, however, are not entirely convinced that Trump’s influence on the economy will be stellar. Goldman economists think that the policies promoted by the Trump administration present “risks in both directions; tax cuts and infrastructure funding could boost growth but could be offset by the negative effects of restrictions on trade and immigration.”
In their view, the cost-benefit of Trump’s policies lean in the negative direction for three reasons.
1. The GOP’s Fledgling Obamacare Repeal Effort
Trump and congressional Republicans are having a difficult time repealing Obamacare. While both Trump and Republicans once promised an expedient “repeal and replace,” they are now changing their respective tunes. The narrative on Capitol hill has morphed from “repeal,” to “repair,” Obamacare. Trump is now saying the repeal effort could take till 2018. (RELATED: Obamacare Is Not Going Anywhere)
The recent difficulty has Goldman’s economists thinking it “does not bode well for reaching a quick agreement on tax reform or infrastructure funding, and reinforces our view that a fiscal boost, if it happens, is mostly a 2018 story.”
2. Heightened Partisanship In Politics
Partisanship in politics came to a head in late January after Trump signed an executive order suspending all refugee admissions to the U.S. The order was met with widespread opposition from the left, calling the measure a “Muslim ban.” The backlash came to a head when recently dismissed acting Attorney General Sally Yates said she would not uphold the ban, and called upon her colleagues to do the same. Yates was terminated by the Trump administration Tuesday, heightening the rift between Republicans and Democrats. (RELATED: Democrats Try Crying To Change Hearts Over ‘Muslim Ban’)
“While bipartisan cooperation looked possible on some issues following the election, the political environment appears to be as polarized as ever, suggesting that many issues that require bipartisan support are likely to face substantial obstacles,” the economists wrote. “While we have not expected a sweeping overhaul of regulation in any of these areas to become law, recent developments lower the probability somewhat that even incremental changes could pass in the Senate.”
3. Legitimate Possibility Of A Market Collapse
Trump’s executive order regarding refugee admissions, his plan to build a wall along the southern border of the U.S., and his “America First,” trade policy, have Goldman’s research team thinking the market could be in for a real shock.
“Some of the recent administrative actions by the Trump Administration serve as a reminder that the president is likely to follow through on campaign promises on trade and immigration, some of which could be disruptive for financial markets and the real economy,” the economists wrote.
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