Is Trump's honeymoon with investors over?

SINCE the US presidential election last November, American and global stocks have rallied by around 8 per cent and Australian shares by about 12 per cent to hit their recent highs. The US dollar, bond yields and some commodity prices have also jumped. Optimism regarding President Donald Trump's pro-growth policies was not the only factor playing a role in this rally - global economic indicators have also improved significantly in most regions. With Mr Trump now inaugurated as president, we are at the point where that optimism is being tested.

Mr Trump has been president for only two weeks, but it seems he has already done a lot with numerous major announcements. So far, the key moves relate to: minimising the economic burden of Obamacare; reviewing new regulations; preventing non-governmental organisations that perform abortions from receiving federal funding; withdrawing the United States from the Trans-Pacific Partnership deal; freezing federal hiring; moving towards approving the Dakota and Keystone XL oil pipelines; speeding up approvals for high-priority infrastructural projects; reducing regulatory burdens facing manufacturers; directing the construction of a wall with Mexico; support for a "border adjustment tax"; and various restrictions around immigration, in particular a 90-day ban on travellers to the US from seven Muslim-majority countries.

While these moves are basically consistent with his campaign policies, some have created considerable consternation in the US and globally. And Mr Trump and his team's "thin skin" has led to various distractions - such as, around how many people attended his inauguration and "alternative facts". Initially, investment markets reacted favourably after Mr Trump's inauguration as many of his orders were pro-business, but the travel ban has seen uncertainty creep in around whether the new administration knows what it is doing (the ban seems to have been poorly thought through in terms of implementation and legalities as it was not vetted by the bureaucracy first), and around how isolationist Mr Trump is prepared to take the US. Clearly, Mr Trump is a different kind of US president from the norm. This note looks at the main issues of importance to investors.