We admit it. We got caught off-guard by the results. We had a nice feature piece ready about food, deflationary pressures, and the manner in which tech is affecting restaurants and grocers. Business as usual with President-Elect Clinton. But then Tuesday happened.
So, instead we reached out to a small subset of the PETITION community for their take on what the election may mean for 2017. Here's what they had to say:
"Trump trade policies centered around taxing imports to protect American manufacturing will decimate consumer spending and accelerate the already rapid decline of brick and mortar retail...should be good for restructuring, right up until he gets goaded into World War III by some sort of 8th grade insult." - Restructuring Advisor, TX
"Despite an equity market rally following Trump's victory on Tuesday, plenty of signs point to an increase in restructuring activity on the horizon. First, there will be winners from deregulation, potential protectionism and lower taxes but there will be plenty of losers as well. Second, add higher interest rates and a steepening yield curve to the market's recent addiction to floating rate debt and levered borrowers are going to have a dramatically higher and in many cases unsustainable interest burden. Higher rates will also pull capital away from investor appetite to refinance the riskiest credits. Third, Trump thinks bankruptcy is a great tool -- don't expect him to go easy on a struggling sector; he may point debtors to the tools available under the Code as a smart solution. And finally, these drivers of increased activity all assume the best version of Trump shows up - any destabilization from Trump volatility in policy or leadership will likely spook capital markets and create far greater restructuring needs." - Investment Banker, NY
"I don’t have any special insight into Trump. The probability of Trump winning was so low that very few people involved in the markets went beyond focusing on his rhetoric to understanding what he would mean for the country economically. That was clearly a mistake. If Hillary would have been the predictable president with flat to moderate growth, Trump seems to be the high growth president with high tail risk. Trump, filtered through the Paul Ryan orthodoxy, with a Republican Senate and a Republican House, has a possibility of being highly productive and the market seems to be willing to believe that until proven otherwise. In particular, the market is and will continue to be focused on the unwinding of certain themes that have constrained growth during the Obama administration. Chief among these issues were increased regulation in certain sectors such as banking under Dodd Frank and the CFPB, the sweeping changes as a result of Obamacare, and a lack of progress on legislative initiatives such as increased infrastructure spending due to gridlock in Washington. While not entirely Obama’s fault, ultimately, the degree of change combined with legislative gridlock led to massive uncertainty that constrained capacity expansion and new construction, traditionally a large driver of growth in the economy.
The view is now that the path is clear. With both the executive and legislative branches controlled by the Republicans and Trump’s agenda on some of these key issues relatively clear, the uncertainty has been eliminated, resulting in higher asset values and, in all likelihood, increased capital spending. The virtuous circle will then commence as higher asset values, begets more spending, begets higher asset values and so on. In particular, the long duration of lackluster business expenditure combined with a need for significant infrastructure spending has led to massive pent up demand and could further lead, ultimately, to a super cycle in corporate expenditure – a prospect that has excited distressed debt and equity investors in US markets.
However, caution is warranted. It’s not all roses. Some sectors such as steel/iron ore may benefit from higher tariffs on Chinese imports of steel and increased infrastructure spending but automotive growth may be tempered by changes in free trade agreements as costs rise and foreign markets close. Community banks will do better as Dodd Frank is re-worked but large banks may continue to face harsh scrutiny as too big to fail. Healthcare’s picture will remain muddled for some time. For now, this will be viewed as a rising tide lifts all boats but I don’t believe that such a view is entirely accurate. I would steer towards the clear winners.
My advice: in order to make money in this market, ignore Trump’s antics and focus on the policy he’s likely to achieve. Clear themes will emerge." - Investor, NY
The immediate effect of the election is clear: recent restructuring hotspots such as oil and gas, mining, and commodities saw bumps this week while others like healthcare and renewables got beat up badly. The recent focus on regulation of biotech/pharma will likely dim. So, too, for for-profit education and private prisons. Tech - notably the "FANG" stocks - got hit hard. Query whether this will help accelerate what many view as the inevitable popping of the tech bubble.
Speaking of tech, there is an active petition on Change.org to get Donald Trump to sit with Elon Musk to discuss, among other things, climate change. Notably, Musk has been silent since the election; aside from one EPA-related retweet, his twitter feed has nothing but an oddly and somewhat ironically timed announcement about Tesla's new German production facility. Musk is likely in wait-and-see mode: after all, it's no secret that both Tesla and SolarCity have benefited significantly from government subsidy over the course of the Obama administration and Trump was quick to highlight the Solyndra failure in the debates. The imminent showdown between Trump and the inspiration for Iron Man should be interesting: solar has taken a beating this past year with SunEdison and Verengo filing for bankruptcy and Yeloha shutting down shop. There isn't a lot of room for error in the space...