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The Trump Spread

It seems that politically the bar for Trump is set very low.  Democrats feel he is inexperienced, incompetent, and of such poor character that success is unimaginable. They remain unable to imagine his victory without nefarious influences. This makes them ripe for the kind of conspiracy theories more commonly associated with the right.

Establishment Republicans fear his inexperience and pragmatic sacrifice of conservative principles whether on the economy or foreign affairs.  If he just avoids catastrophic failure, he would seem a political success based on the low expectation from the establishments of both parties.

Economically, on the other hand, the bar is set quite high. His victory surprised the market for the better, but the run up on top of the increase of the last several years may be a bit stretched.  The market seems to have assumed his success in achieving all his campaign promises. It also seems to assume that his potentially damaging trade policies either will not occur or will not have any serious repercussions.  Any disappointment may cause the market to swoon. It also assumes no dramatic events

Perhaps the market is simply delighted that the trend in friction costs has been arrested and that alone will have productive outcomes.

Politically we are expecting the worst; economically we are expecting the best. Both will likely be disappointed.

Category: Economics, Politics

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