The financial markets showed enormous faith in the governing skills of Donald Trump in recent weeks, believing he would usher in a new era of economic growth. It’s very hard to see that faith remaining intact in the coming weeks.
In the lead up to his taking office, Trump has shown very little interest in doing any of the actual work required to implement tax cuts and fiscal stimulus. Instead of preparing his team, drafting policy specifics and making friends in Congress, he has obsessed about foreign policy and ranted against his enemies.
He has embraced Russia and attacked European nations and China, a fixation that has no logical place in a pro-growth economic agenda. Making friend with Russia and alienating everyone else will certainly not benefit American companies.
What’s more, Steven Mnuchin, Trump’s pick for treasury secretary, will face intense political opposition in the Senate when he finally gets his confirmation hearing. His role in questionable foreclosures conducted by a bank he ran could generate enough trouble to make him ineffective in office or even to block his confirmation.
In short, Trump has picked fights he did not need to pick and burned through whatever political capital and credibility he enjoyed back in November. He is the most unpopular new president in the modern age, according to polls. Even the Republican-controlled Congress may not find it easy to work with him.
The market’s favorable reaction to his election cannot last. Trading in precious metals reveals that sentiment is already changing. The price of gold and gold mining stocks dropped after the election but have started rising again as the reality of Trump’s presidency began to emerge. GLD was at $107.34 on Dec. 15 and had risen to $114.21 on Jan. 13. Spot gold per ounce rose from a low of $1130 to $1195 in roughly the same 30-day period. Silver prices have also been rising.