Despite initial worries that global stock markets would plummet, and Dow futures initially descending 800 points when news of Trump victory became clear, that loss was regained and the average closed up an amazing 259 points the next day. This strong rebound was followed by additional gains over the week as investors were comforted by Donald Trump's conciliatory acceptance speech, a gracious concession speech by Hillary Clinton and expectations of soon-to-come fiscal stimulus.
The election results were a huge surprise to many - perhaps including Donald Trump himself. Now global markets as well as the American and world publics are attempting to digest what happened and to determine where we go from here. Consequently, the major question ahead is which Trump will be in the White House. Hopefully it will be a more measured leader, willing and able to compromise - rather than the inflexible and quick to take offense man who was evident during much of the campaign.
Notwithstanding the real fear in some quarters about what a Trump presidency will bring, there is a possibility that not only is the future not as bleak and uncertain as expected, but that - perhaps - there is hope for a positive direction. But much hinges on Trump's new persona - and whether he will take this opportunity to reach out and engage - not only with "Never Trumpers" in the Republican party, but also with Sanders-Warren progressives and other constituencies in the U.S. and around the world. This is essential if he truly desires to bring us together - and begin healing the wounds, fear and desperation - to become the transformational leader the US needs at this time.
If one examines Trump and his political orientation over time, it is far from clear to which right-wing values and policies he is truly committed. It is possible he is more of a pragmatist - some might say an opportunist. Looking ahead, his fundamental choice is whether to move in a conciliatory, bipartisan direction to address fundamental issues, such as the need to shift away from excessive reliance on monetary and toward fiscal policy, focus on infrastructure development, and to generally restore confidence in the US economy. The alternative would reinforce and heighten the troubling divisions that have led to a deeply divided country, which continues to suffer from a highly partisan, accusatory political dynamic. The resulting gridlock will only serve to keep distracting Americans from resolving the hard-core issues that need to be addressed.
Clues as to whether investors have been right to add exposure and embrace the "Trump Tower" rally we have seen over the past week will be seen in the choices made for his cabinet. Appointing Reince Priebus as Chief of Staff is a good start. If he continues to embraces pragmatism and a businesslike - nonideological approach and additional people such as John Taylor at Treasury, Wilbur Ross at Commerce, Richard Haas at State are chosen - all rumored experienced candidates who are not ideologues - it will signal a move toward pragmatism and effort to begin alleviating the real anger, disillusionment and wounds that have been prevalent throughout the campaign and its aftermath.
Some - including many on the Democratic side - would argue the gridlock seen in recent years and the strategy to block and oppose everything President Obama moved to achieve was due to partisan obstinacy. Many also share Harry Reid's anger about the "rush to normalize Trump" in spite of the heated rhetoric and all that has transpired during the campaign. This does not mean, however, that Democrats and those disaffected by Trump's victory need to reciprocate in a similar obstinate manner, continuing the dynamic of rancor seen in recent years, irrespective of the issues involved.
Clearly Trump struck a cord and was able to unify a large part of US society. If the involvement of his constituents allows positive movement on infrastructure, fiscal policy and other issues - there will undoubtedly still be major disagreements, debate and problems as there is in all political discourse - but the move should be embraced so that we can move forward.
On the other hand, if Trump selects more hardline and populist Republicans to his cabinet, such as Newt Gingrich, Sarah Palin or Steve Bannon, the U.S. political landscape will instead become much more challenging. These remain highly divisive figures, even within Republican ranks. The risk is that an ideologically rigid administration would exacerbate standing tensions within U.S. society and contribute to further blockages of legislation, litigation, hearings, rising discontent and social unrest. The nation badly needs to heal and return to business if Trump is to truly "make America great again."
This will not be easy. A President Trump will surely face strong resistance, or even a "rebellion within his base" predicted by such allies as political consultant Roger Stone, should he move in the more pragmatic, balanced direction. Likewise there will be increasing discontent and resistance from other constituencies as well, including both those already protesting and, on the opposite side, from some of the darker undercurrents that helped get him elected to the White House. All of this makes for a tricky and potentially volatile political and economic landscape. The country desperately needs to move ahead in a more bipartisan manner; both Democrats and Republicans should concern themselves with pressing problems, rather than how to best posture for the next elections in 2018.
A more pragmatic White House would also bode well for foreign affairs. Trump the campaigner held out a fortress America, trade wars with Canada, Mexico, China, and Japan, a snuggling up to Putin's Russia, and a rounding up and sending back of millions of illegal immigrants, mainly to Latin America. He also suggested it was time to renegotiate NAFTA, NATO and other agreements and alliances. A more pragmatic Trump, who is geared to making deals, could proceed to open discussions with key trade partners, but in a more conciliatory fashion. Additionally, Trump could force an important rethink of NATO and its role in the world, as well as a range of other institutions, without threatening to unravel them.
Trump sits at a major historical crossroads. What he does during this important transitional period will shape the next four years for the U.S. and affect global politics and the world economy. It will also provide a tone to markets, which could still plummet, especially if the newly minted Trump administration promotes divisiveness, embarks on trade wars, and seeks to unwind old alliances. Instead, Trump has an amazing opportunity to set the stage for the nation's rise above the sharp socio-economic divisions that have been plaguing America.
Hopefully President Trump will use his victory to become president for all America as he stated in his victory address, and use this opportunity to begin healing the nation and to address the many challenges the country faces. This could be as radical a change in policy direction as it was when Richard Nixon went to China and opened a new chapter in Sino-American relations. Whether he will accept this challenge and move to become a transformational president driven by pragmatism is a major question. There is a real risk that he will instead seek to push through a divisive, ideological, and confrontational agenda. This choice will become apparent in the weeks to come.
Keith Rabin serves as president of KWR International, Inc. and KWR International (Asia) Pte Ltd and Dr. Scott MacDonald is the Chief Economist for Smith's Research and Gradings.
