Since the election of Donald Trump, the Dow Jones Industrial Average has risen about 2,000 points, and investors are eager to see if it will reach the next major milestone – the 20,000 mark.
Michael Driscoll is a business professor at Adelphi University on Long Island. He’s also a 28-year Wall Street veteran. He recently sat down with WSHU’s All Things Considered Host Bill Buchner to discuss the market and the impact of Trump’s election. Below is a transcript of their conversation.
On the night of the election, futures trading was halted as investors panicked with the surprise election of Donald Trump. But here we are, more than, well, two months later, and the Dow is poised to hit a record high. What do you make of the market’s speculation on the Trump presidency the night of the election?
You know, Bill, I will never forget that night for a lot of different reasons. I was standing in front of a class, and I had my Bloomberg screens up on this lecture-type class I was teaching in. The class noticed the red headlines coming across that the Mexican peso had just dropped 11 percent. And I looked at the class and they looked at me, and it was kind of a collective ‘Uh-oh, I think that we just got a forecast on how this election is going to turn out.’
And by 9:00, or 9:30 the next morning as the U.S. was opening, it had almost like a 1,000 point turn around in the Dow futures contract.
It was a remarkable night, and I think me, as a teacher, and for my students to sit and watch this in real time, it was, as I say, a teachable moment that I don’t think any of us will forget.
There is certainly – there is uncertainty I should say – over foreign policy, especially given statements Trump made on the campaign trail…about China…and of course just this week the Obama administration aimed sanctions against Russia. Is that something that could stand in the way of the rise of the Dow?
I would say very much so, Bill. There is an awful lot out there that is going to ultimately give investors pause for concern. One thing markets – I have been watching them for a long time – the one thing markets hate is uncertainty.
And geopolitical risk that we may be facing as a nation in the months and years to come, I think is really at some point going to have a very dramatic impact on investors and hopefully nothing more than investors. But, there is a lot of uncertainty out there.
There is some concern as to a potential trade war with China. That is something that as a nation, I don't think we want to get involved in because I am not so sure the U.S. would come out on the winning side of that.
Well, we certainly know that Donald Trump is volatile as a politician with his tweets, his off-the-cuff comments – could that be a sign of volatility to come in the market this year?
Are you completely comfortable calling Donald Trump a politician, Bill? I am not so sure, I am not so sure he is yet. I know he was a reasonably successful real estate developer, I know he has been a reasonably successful reality TV host. I am hesitant to call Donald Trump a politician yet.
Trump has talked about many things on the campaign trail. He has talked about tariffs, lowering the corporate tax rate, abolishing many federal regulations...What do you think could have the biggest impact on the market, among those policies?
I think lowering corporate tax rates would probably be the most impactful from my perspective in a good way. I think that if U.S. corporate tax rates went from 35 percent to 15 percent, rivaling some of the lowest rates that anyone in the world imposes upon companies, would be a huge benefit to corporate America.
But there are some other things: The infrastructure spending which is great for a lot of U.S. companies that would get bigger contracts and jobs from all this.
Concomitant with that would be a huge expansion of the U.S. budget deficit. But the initial, stimulative forecast for lowering tax rates and increases in infrastructure spending would have a very positive impact on the U.S. economy. But there is potential for a little bit of a rollercoaster in the months and years to come.
Professor, it has been a pleasure talking to you. And I wish you a Happy New Year.
Thank you very much, Bill, and Happy New Year to you and to all of your listeners as well.
