With Trump, America is open for business again
Following President-elect Donald Trump’s intervention with Greg Hayes, the CEO of United Technologies, which owns Carrier Corporation, Carrier announced it would keep hundreds of jobs in the United States that it had planned to send to Mexico.
You might not have known from Trump’s crowing, but Carrier is still moving more jobs to Mexico than it’s keeping in Indiana, and has announced an increase in the price of some of its HVAC equipment. The announcement can’t be a coincidence. As Milton Friedman put it, protectionism is very good at one thing: protecting consumers from lower prices.
On Tuesday, Trump appeared in the lobby of Trump Tower with Masayoshi Son, CEO of the Japanese investment behemoth SoftBank, to announce that “Masa” plans to invest $50 billion in tech startups in the United States, aiming to create 50,000 American jobs.
You might not have known from Trump’s crowing, but SoftBank actually announced at least $25 billion of this investment in October, so while this may be a modest acceleration of the company’s plans, Trump did not magically conjure $50 billion out of one of the world’s best investors, at least not yet.
The media and other Trump opponents will focus on these exaggerations. They’ll say that Trump overstated what these “great deals” accomplished for the country and for the economy. They’ll criticize tax incentives as cronyism and Trump’s direct intervention as “unpresidential.” And these critics are absolutely right.
But in a much more important and fundamental way, such criticisms miss the big economic picture, a picture which is far brighter than it was on the morning of Nov. 8, when betting odds were still on Hillary Clinton becoming the next president of the United States.
Whether the short-term impacts of these headline-making deals are enormous or small, whether they represent real change or are simply old news in a new frame, the real message coming through Trump’s words and deeds, his persona, his increasing policy specificity, and his Cabinet and executive agency picks, is that this administration, unlike that of Barack Obama or what might have been under Hillary Clinton, believes in capitalism and profit, and knows that government is harmful to both.
In the month since Donald Trump was elected, the S&P 500 (the world’s most important stock market benchmark) is up 5 percent in anticipation of increased corporate earnings due to expected reductions in tax rates and regulatory burdens. That means investors, probably including your pension fund or 401(k), in just those 500 companies have seen their assets increase by a total of about $1 trillion in one month.
What’s particularly interesting is that this rally occurred at the same time that the yield on the 10-year U.S. Treasury Note spiked from about 1.8 percent to nearly 2.4 percent in that same time frame, something that would normally function as an enormous headwind to stock prices.
The bond market is screaming about “economic growth,” shouting “you’ll finally be able to make a decent return on investment capital so you better not tie it up in bonds earning under 2 percent!”
The message of financial markets is that the arrival of Trump is a wildly beneficial turn in America’s economic path. A state with an economy as diverse as Colorado’s — from high tech to energy to agriculture to tourism — is particularly well-positioned to benefit.
Despite Trump’s unnecessary exaggeration, occasional anti-trade rhetoric, and juvenile Twitter distractions, our next president’s economic message is remarkably clear. As he tweeted a week ago, “America is open for business.” Now let’s go make some money. Ross Kaminsky is host of “The Ross Kaminsky Show” weekday mornings on 630 KHOW.