As Republicans gather in Cleveland in the week ahead, they will be counting delegates. Investors, meanwhile, will be counting profits and listening for policies that could affect them.
Donald Trump, the businessman turned likely GOP presidential nominee, is set to become the Republican Party’s standard-bearer as the Standard & Poor’s 500 index hovers near all-time highs. Seeing Trump-branded economic policies take a step closer to actual implementation, though, could make investors very nervous.
Trump’s strong-armed tactics on trade, for instance, have been roundly criticized by economists as protectionist and potentially disastrous for America’s consumers and exporters. Trump has talked about slapping a 45 percent tax on Chinese-made products sold in the United States. Retailers, already under intense price pressure from online outlets, would pass this tariff on to consumers. American exporters, such as auto manufacturers and food producers, would likely face retaliatory charges on the products they hope to sell in China.
Trump, like many, has acknowledged the tax code is broken. He has called for cutting personal and corporate tax rates. He has also advocated for more spending on the military and doesn’t think spiraling Medicare spending needs to change. While such policies may be profitable for defense contractors and health care providers, Moody’s Analytics predicts, “The economy will be significantly weaker if Mr. Trump’s economic proposals are adopted.”
The Republican Party has long been considered the party of business. It was Republican President Calvin Coolidge who chimed in 1925, “The chief business of the American people is business.”
Investors will hear a lot about 21st century Republicanism and business during the week ahead. Regardless of their political persuasion, long-term investors should heed the adage of, “follow the money,” and look for profit potential.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami, where he is the vice president of news. Follow him on Twitter @HudsonsView.