Congressional speech Squaring the Circle

Donald Trump must sell his federal budget plan to the U.S. Congress tonight, but Wall Street appears to have already bought it.
The U.S. president's speech this evening will not be as easy as this appearance in front of supporters on February 17 in Melbourne, Florida.

U.S. President Donald Trump faces a big test today when he presents his first federal budget to Congress, a crowd worried about polarizing spending cuts, and their own reelection bids.

But one group is largely uncritical of the new president’s priorities: Wall Street.

“Markets no doubt appear to like what they are hearing,’’ said Michael Hewson, the chief market analyst at CMC Markets UK in London.

The stirring slogans that propelled him into the White House won’t necessarily be enough to satisfy congressional members, who will need hard facts and clear arguments to sell his controversial policies back in their districts.

Mr. Trump is promising to boost military spending by 10 percent, which would increase annual defense spending by $54 billion to $603 billion, but could jeopardize social programs such as Obamacare and Planned Parenthood.

The President now needs to deliver, he’s talked the talk and he now needs to walk the walk. Michael Hewson, Chief market analyst at CMC Markets UK

In a sense, Mr. Trump appears to be caught in the difficult space between his campaign promises and the realities of Washington, a city that has been ruled for much of its history by career politicians and not true outsiders like him. Whether Mr. Trump can “square the circle’’ and turn expectations into solid support is the real challenge before him tonight.

But the nitty gritty of Washington politics is not an overriding focus of investors. Most seem to like the new president’s plans to hike domestic spending through weapons purchases and a potentially huge infrastructure package for roads, bridges and the internet.

U.S. markets, which closed at a record high on Monday, were up in Europe and in early trading in New York. Since he was elected on November 4, the Dow Jones Industrial Average has risen 16.5 percent. Defense contractors and other heavy equipment makers have fared equally well on Wall Street during the first 100 days of the Trump administration.

Caterpillar, the tractor maker that also produces military vehicles, is up 18 percent since the election, and Boeing, also a maker of fighter aircraft, is up 28.5 percent. The markets have risen faster during Trump’s first month than any other new president since John F. Kennedy took office.

But it is clear also that Mr. Trump needs to do more than promise, he needs to deliver his legislative priorities and that’s where Congress comes in.

"The President now needs to deliver,’’ said Mr. Hewson, the London market analyst, in a commentary. “He’s talked the talk and he now needs to walk the walk”

But convincing Congress won’t be as easy as convincing his own loyal voters. Furthermore, difficult and perhaps politically costly decisions are also coming up, such as the raising of the U.S. debt ceiling, which is up for a vote by March 15.

Mr. Trump is expected to stay true to his campaign theme of “America First’’ during his speech to Congress. His press secretary, Sean Spicer, is promising a focus on the “renewal of American spirit.”

The man who has called himself “the most militaristic person ever” is likely to stay true to form tonight when he addresses Congress at 9 p.m. in Washington (3 a.m. in Berlin). Investors appear to be awaiting his remarks with optimism.


Alexandra Randall is an editor at Handelsblatt Global in Berlin. To reach her: [email protected]