Reflections on the Trump Presidency
Reflections on the Trump Presidency by Ray Dalio
Before and immediately after it was clear that Donald Trump had been elected, the markets (especially the stock market) had negative votes on the man (thinking he might be irresponsible), while after he got elected, the markets reacted to the man’s policies—so the correlations reversed. That shift was due to the changing complexion of market participants—those who drove the markets after his election were largely those who kept their powder dry until they saw the outcome and chose to process (and bet on) the policies themselves. As for us, we chose not to bet on whether or not he would be elected and/or whether or not he would be prudent because we didn’t have an edge in predicting these things. We try to improve our odds of being right by knowing when not to bet, which was the case.
Having said that, we want to be clear that we think that the man’s policies will have a big impact on the world. Over the last few days, we have seen very early indications of what a Trump presidency might be like via his progress with appointments and initiatives, as well as other feedback that we are getting from various sources, but clearly it is too early to be confident about any assessments. What follows are simply our preliminary impressions from these. We want to make clear that we are distinguishing between a) the sensibility of the ideology (e.g., one leader’s policies might be “conservative/right” while another’s might be “liberal/left”) and b) the capabilities of the people driving these policies. To clarify the distinction, one could have capable people driving conservative/right policies or one can have incapable people driving them, and the same is true for liberal/left policies. To understand where we are likely to be headed, we need to assess both. To be clear, we are more non-ideological and practical/mechanical because to us economies and markets work like machines and our job is simply to understand how the levers will be moved and what outcome the moving of them is likely to produce.