US reaction: President Trump's inauguration speech - "America First"

David Page, Senior Economist at AXA Investment Managers (AXA IM)

• President Trump’s inauguration speech, reiterated his theme: to put “America first”
• The speech returned to the concerns of lost jobs and factories and a promise to reverse these trends
• Financial markets posted little reaction
• We continue to see risks that the new administration pursues trade protectionism that may create global tensions and headwinds to US growth

David Page, Senior Economist at AXA Investment Managers (AXA IM), reacts to President Trump’s inauguration speech:

“Donald Trump has just become the 45th President of the United States. His inauguration speech reprised themes from the campaign trail and built on the principle that he would hand power back to US citizens, to deliver successes that mattered to them, and to make America great again.

“There is only so much that we can take from such moments of soaring rhetoric. However, insofar as President Trump set out the central theme of his Presidency, it goes someway to reveal his policy priorities. The President returned three times to the loss of jobs and ‘closed .., rusted out.. , and shuttered’ factories across America. Trump promised to ‘bring back jobs’. He promised that ‘protection will lead to great prosperity and strength’. He promised to ‘make America great again’.

“Financial markets posted little reaction to his speech: 2-year US government yields dipped by 1bp to 1.20%, but 10-year yields were unchanged as was the dollar and the S&P index. Markets saw little to react to.

“To our minds, Trump’s speech echoed campaign trail protectionism, and although it referred to infrastructure activity, there was much less focus on the prospect of tax cuts or stimulus that has dominated market thinking since the election. As Trump discussed the ‘hour of action’, the prospects for policy in the first 100 days continue to include the risks that we have flagged over the possibility of tariffs or other trade protectionism, with the coincident risk of retaliatory measures elsewhere around the globe. If these risks materialise, markets may lose some of the optimism that has characterised the last two months.”

ENDS