Disrupters rule the world; Reporting season underway
Page 1 of 1
Trump's attempt to interrupt the powerful and widening tide of diversity around the globe will make the US weaker, not stronger, in the long term, Morningstar's Peter Warnes says.
With the stroke of the pen on an executive order, President Donald J. Trump fired the first shot in an isolationist war--a war designed to protect US borders.
The order severely restricts immigration from seven majority-Muslim countries, suspends all refugee admission for 120 days and bars all Syrian refugees indefinitely.
Border security was one of Trump's main campaign promises. Initially airports were thrown into chaos, until there was clarification the order applied only to non-US citizens.
The initial reaction in global equities markets was negative, quelling the euphoria of the Dow breaking through 20,000 last week. Currency and bond markets seemed to take little notice, although the US$ has subsequently weakened modestly.
Polls taken prior to the media outbursts show 57 per cent of Americans supported the temporary bans and 33 per cent opposed them. It shows the strong polarisation of opinion in the US with little middle ground. To my mind, this elevates the potential risk.
The world has and will continue to grow and thrive because of diversity, and increasing globalisation of the economy and trade. President Trump's attempt to interrupt the powerful and widening tide of diversity is destined to fail.
It would make the US weaker, not stronger, in the long term and would reduce the standard of living of consumers, both in the US and globally.
The rhetoric accusing almost every trading partner of currency manipulation, particularly those where the US has a trade deficit, is also counter-productive.
Trump's first week in office made Pac-Man look statuesque. The fountain pen worked overtime, signing 18 executive orders. This is what the electorate wanted--perceived or actual pro-growth, pro-job, border security action.
This was Trump's election platform and he wants to be seen to be delivering. But heightened delivery can have consequences, just like friendly fire.
Investors are currently poring over 4Q16 profit results and monitoring 2017 guidance. Given the elevated market, the margin of safety is narrow.
Subscribe to Morningstar Premium and get access to invaluable investment research from Morningstar's award-winning and independent team of analysts, the high-performing Morningstar Income Equities Portfolio, indispensable stock and fund screening tools, and much more.
Already a Premium Member? Read it here
Peter Warnes is Morningstar's head of equities research. Any Morningstar ratings/recommendations contained in this report are based on the full research report available from Morningstar.
© 2017 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.
Uncover winning investment ideas and strengthen your portfolio with a 4-week free trial to Premium:
- Your Money Weekly Newsletter
- Independent Fund Analyst Research
- Portfolio X-Ray
- Investment Picks