by Jeff Miller, A Dash of Insight
A Presidential address to Congress is an important occasion. In the first year of a term, it is called just that. In later years, it will be called the State of the Union Address. The circumstances, ceremony, and protocol are the same. I have been watching these speeches for decades, first as a political science and public policy professor and more recently as an investment manager. The combination of these perspectives helps me identify the most important aspects of these events.
Background
The first such speech is especially important as a clue about the new relationship between the executive and legislative branches of government. I previewed Obama in 2009. In 2008 I suggested ideas for the Bush team, predicting that you would not hear that speech. I was (unfortunately) correct in that prediction. My suggestions would have helped to stabilize markets before the 2008 crisis.
The Trump Address
The simple term “address” is quite different from the standard approach of the President. His Inaugural Address is our only example. Most people, including most of the punditry, will be looking for the wrong things. The key points include both style and substance. In the conclusion, I will explain more about why the style is important. Here is your Trump Speech Checklist:
Initial entry. The Doorkeeper of the House will announce his arrival. A normal entry includes sustained and respectful cheering and a slow, hand-shaking pace up the aisle. It will be our first clue about mutual respect, and especially the President’s respect for Congressional traditions.
Trump’s target audience. In these speeches, there is always tension between playing to the room or to the TV audience. Trump’s style generally emphasizes the audience in front of him and is fueled by feedback from that audience. Most people do not understand how challenging it can be to remain focused on the larger television audience instead of what you see right in front of you.
Specific policy statements. Do not expect fresh news. He has already commented on most key issues, but without any real legislation. This is almost a polar opposite of the early days of Obama – early legislative success, but lingering doubt about what was to come next.
Signals of cooperation – in both directions. Will the President embrace the power and authority of Congress, seeking their cooperation? Will he realize that support from Democrats will be needed on some issues? And will the Congressional audience reciprocate and appreciate any such overtures?
Demonstration of political savvy. Recent statements suggest that the new administration has learned about the necessities of Congressional politics, and the implied order of policy actions. Any such signals will get a favorable reception on both sides of the aisle.
Channeling the Great Communicator. Since the Reagan era it has been typical for Presidents to salt the audience with special guests who will be recognized. Most importantly, this humanizes the need for policy proposals. Putting a face on problems is powerful symbolism. Rumor has it that Democrats will have their own guests, but that is not likely to matter.
Conclusion
The media will have various criteria for determining the success of this address. Polls will give us another take.
For investors, we can look for information on two key subjects:
Compromise. The market does not want years of fighting over key policies. Think back to the election night reversal in stock futures after the President-elect made a conciliatory speech. Investors want certainty (meaning compromise) more than any specific policy.
Timing. Most of the punditry has not done well in identifying “Trump stocks.” That is not surprising. This job requires a sector analysis of policies, needed cooperation, timing, and analysis of affected stocks. I created and described a Trump matrix, which continues to build with each new piece of information.
This preview is not as much fun as a beer-drinking bingo card of likely statements, but it will help you to focus on what is important.
If you really want to own the right market sectors and stocks, you need a firm grasp on the likely policy changes.
