Trump’s first address to Congress: Should you smile or keep worrying on Dalal Street

NEW DELHI: Stock markets globally were fearful of what US President Donald Trump would say in his first speech to US Congress—from tax and healthcare reforms to immigration and protectionist policies to the ‘Great Wall’ along the US-Mexico border. The event, however, did not turn out to be that big as big an event for financial markets in general.

Dalal Street experts noted Trump’s tone was better, but lacked details.

Vinod Nair, Head of Research at Geojit Financial Services said that there were no additional views or issues mentioned in the speech that the market should not be surprised with.

“It will be very watchful for the global market, as the true acceptance and real impact of Trump's protectionist and trading policy reforms evolves over the medium term. At the same time, we can also understand that this new reforms will be beneficiary to the US economy and provide support to the global economy. That said, for markets valuations are looking stretched, which will impact both the US as well as domestic equities,” Nair said.

Trump, early on Wednesday (IST), said that his team was developing tax reforms that would reduce the rate on US companies, so they could compete and thrive ‘anywhere and with anyone’. But there was no clarity on a proposed border adjustment tax that could boost the country’s exports over imports.
The US President was seen going a bit soft as the tone of his speech was more restrained than earlier harsh rhetoric, saying US immigration should be based on a merit-based system, rather than relying on lower-skilled immigrants. While lacking details, Trump said he wanted to provide a massive tax relief to the US middle class and cut corporate tax rates.

“The tone is certainly better. I think where the disappointment is the lack of details. We were hoping for something on tax reform, does he endorse border adjustment tax, you know what kind of corporate tax reform are we talking about, we really got nothing on tax reform. I think the market will be disappointed on details but at least the tone is not as negative as it was in the inauguration,” said Priya Misra at TD Securities.

Mishra said that he was nervous as he felt that Trump would take a negative stance around immigration or around the fact that the courts did not uphold his travel ban or any inauguration style speech that would have been very negative.

“He has actually not taken the negative side. So I think stocks will be somewhat heartened by the fact priorities are the same. And it is clear that for both Obamacare and tax reforms they have to do it through this legislative process called reconciliation which requires practically all Republicans to be on board because they are going to do it through a partisan way so they cannot lose any Republicans,” he said.

Amar Ambani of IIFL Private Wealth said that the US President in his first address to the joint session of Congress was firing on all cylinders.

“Trump touched upon a likely historic tax reform that will reduce the tax rate on US firms to enable them to compete and thrive anywhere and with anyone. Massive tax relief for the middle class is also on the cards,” he noted.