Will Investors Give Trump 100 Days to Work Out the Details of His Policies?

Stocks retreated from their highs and gold prices firmed shortly after Donald Trump was sworn in as President of the United States. Of course, it’s is still early in the session, but if the current price action is any indication, we can expect volatility into the close.

Trump delivered a 16-minute inauguration speech on Friday with a clearly stated “America first” theme. He also kept his speech centered on the American people, saying, “The forgotten men and women of this country will be forgotten no longer.”

As far as the financial markets are concerned, Trump repeated his campaign pledges to push companies to return jobs to the U.S. and to rebuild American infrastructure.

Trump takes office with one of the lowest approval rates of any new President. According to polls this week, only 40 percent of Americans viewed Trump favorably, the lowest rating for an incoming president since Democrat Jimmy Carter in 1977. So one of the first things he is likely to do is take steps to rebuild his image through a number of major decisions and accomplishments.

These decisions will include providing investors with the details of his plan to rebuild America. Trump is also likely to push key issues such as isolationism and protectionism. Two key issues that will affect how U.S. companies do business abroad and how other countries trade goods and service with the U.S.

Traditionally, the investing world gives the incoming President the first 100 days to get his administration in order. This makes sense because he should be allowed to transition into his new position without any undue pressures.

However, we live in a different world today where investors need short-term satisfaction. So the jury is still out as to whether the financial markets will grant Trump this customary grace period. Stocks are still hovering near all-time highs and gold is at a level not seen in two months. This could be an indication that investors believe in Trump’s ability to get the job done, but are using gold as a hedge to protect themselves against unexpected news and developments.

Some of the buying in gold is speculative buying. These investors are betting on Trump’s failure. If Trump can’t fulfill his promises in a timely manner then U.S. Treasury rates may begin to come back to levels not seen since late November/early December. This in turn should weaken the U.S. Dollar. Additionally, if Trump’s decisions cause turmoil in the economy then the Fed may even retract the number of interest rate hikes it proposed in December.

Going into Trump’s first 100 days in office and given the radical change in the way that things are going to be done in Washington under Trump, we may be poised for tumultuous times ahead in the market place.