10Y dollar S&P 500 tax reform Trump

Look! A Table That Outlines Every Possible Scenario For Markets And Tax Reform

Fingers crossed.

As you’ve probably noticed, Donald Trump’s agenda is coming apart at the seams.

And that makes a lot of sense because as we never tire of reminding you, it was so profoundly unrealistic when taken as a whole as to be completely laughable to anyone with any sense.

Fortunately, “having a lot of sense” isn’t something the U.S. electorate has ever been accused of and so, Trump swept into the Oval Office on a platform that included banning Muslims from entering the country, completely overhauling the nation’s healthcare system, completely overhauling the nation’s tax code, completely overhauling the nation’s trade agreements, ushering in a renaissance in American manufacturing, strengthening the military, bringing peace to the Middle East, and just generally making shit “great.”

Really, the entire slogan (“Make America Great Again”) is comically nebulous and on top of being impossible to pin down by virtue of the fact that it’s meaningless, it sets a bar that is so high as to be impossible to clear. I mean this is a guy who literally told supporters that they would eventually be begging him to put the brakes on the “winning” because there would be so much in the way of it as to make everyone exhausted from running so many circles around the rest of the developed world.

Fast forward 10 months and despite his Twitter protestations, and despite the best efforts of Lou Dobbs to explain how much he’s done, Trump hasn’t done anything and has now resorted to listing nouns with adjectives in front of them as “accomplishments”:

Or like “Russian hooker” or “hideous combover.”

Meanwhile, to the extent there’s any hope left for passing key items on the agenda like tax reform, Trump is doing everything he can to make life a living hell for the people whose support he needs. That effort recently included telling a key GOP Senator that he “couldn’t get elected dog catcher” just hours before a luncheon involving that very same Senator.

So you’d be forgiven for being skeptical about the prospects for tax reform. And one thing that we’ve harped on continually in these pages is the extent to which tax reform is just one of a long list of things Congress is having to grapple with. That underscores the point implicit in our characterization of his agenda as outlined above. It would be impossible to get all of that done even for a skilled negotiator with a penchant for cultivating working, amicable relationships with key lawmakers. Trump is expecting Congress to do all of this while he berates them on Twitter in real-time. Consider this assessment from Barclays:

Tax reform is ambitious and historically difficult, and single-party control of government does not guarantee passage. In addition, President Trump has become more adversarial with the GOP-controlled Congress, taking positions that are forcing Congressional action on a number of controversial issues, such as immigration and the Iran deal. By the end of 2017, Congress needs to pass a budget with reconciliation instructions for tax reform; aims to complete a review of the Iran deal (JCPOA) with “trigger points” for the US to re-impose sanctions; and aims to pass a short-term solution for the Affordable Care Act (ACA), given the president’s decision not to continue cost-reduction subsidies (CSRs). In 2018, it needs to increase the debt limit (Q1 or Q2) and aims to pass a legislative solution for Deferred Action for Childhood Arrivals (DACA) and tax reform or cuts before the mid-term election in November 2018. In addition, since the US is renegotiating NAFTA with Canada and Mexico, the president may initiate a withdrawal from the trade agreement, which would certainly involve Congress, given the 1993 NAFTA Implementation Act. About the only legislative advantage the GOP has is budget reconciliation, which provides a vehicle to pass legislation with a simple majority, but repeated failures on health care reform show how tenuous this advantage is, given the GOP’s slim 52-48 majority in the Senate.

Obviously, that’s hilarious. The idea that all of that is going to get resolved is quite simply laughable and do note that every problem listed there did not exist prior to Trump making it an issue.

But let’s say, for argument’s sake, that there’s further “progress” on tax reform. What’s likely to be affected and how? Well, we’re glad you asked. Consider this handy table from the same Barclays note quoted above:


So that’s the 30,000 view. Let’s zoom on and let the bank provide some actual color:


There’s a ton more in the note, but really, what’s the point? Because all anyone can do is map out the potential impact of various scenarios (as shown above) and hope for the “best.”

And while Trump will tell you he’s doing his best to get this pushed through, his actions certainly don’t suggest that’s true.

But maybe that’s all part of the plan. Maybe he’s adopting the same approach to fiscal policy as he does to trade deals and foreign policy. If that’s the case, then investors can simply refer to the following visual which contains an actual quote from Trump advising Robert Lighthizer on what to tell the South Koreans regarding a trade deal…



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