We’re on day two of a world in which Donald Trump is president-elect, and the feared market meltdown has not materialized.
In fact, some indexes are surging. What happened?
LISTEN: CKNW Business Analyst Rob Levy on post-Trump markets
“I think leading up to all this, with all of the anxiety that we saw in the market, I don’t think anyone would have thought that we would have had the headline ‘Dow Jones surges to record high’ in the wake of Donald Trump election, but that’s what we’re seeing,” says CKNW business analyst Robert Levy.
So what’s going on? Levy says part of it is a ‘blind optimism,’ rooted in the fact that no matter who’s in the White House, business must go on.
But he says now that the uncertainty of the election is over, there are elements of Trump’s platform that are very appealing to the business community.
One of those is boosting infrastructure spending, as Trump pledged to do in his acceptance speech on Election night – a move that’s been popular not just here in Canada, but now across the G20.
Levy says this kind of move could create an inflationary boost to the economy.
“No more looking at central banks and interest rates to stimulate growth, but instead federal governments to start spending money, roads and bridges and that kind of thing, where they can put dollars to work,” he says.
Corporate tax slash
But what may really have markets cooking is optimism about a major change in the U.S. tax code, one that could pay big dividends to the business community.
Trump has also pledged to repatriate trillions of dollars in cash that major American companies like Apple are hoarding in offshore tax havens, because they don’t want to pay U.S. income tax.
Levy says this is a move Obama also wanted to do, but couldn’t get through a Republican Congress. He says now that it’s a Republican in the White House, and Trump proposing a lower “one time special tax” (10% to Obama’s proposed 14%), it could be a reality.
More importantly, he’s looking at a massive slash to the corporate tax rate.
“He wants to lower the corporate tax rate from 35% to 15%,” says Levy – a proposal that Trump’s camp says will be paid for by cutting out loopholes in the tax code and broadening the tax base.
Levy says that 35% rate is one of the highest in the OECD.
“It creates an environment where the U.S. is competitive on an international standpoint, where business can set up. And I think that’s sort of the long term positive factor of all of this is that they want to make an environment that’s conducive to business,” he says.