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Donald Trump retook the presidency in part because many voters didn’t feel they had participated in America’s prosperity.
During his first week back in office, Trump signed a flurry of executive orders, some of which are aimed at correcting that imbalance. In one example, he signed a “Presidential Memorandum to deliver emergency price relief,” calling on his administration to cut down on regulations and find ways to expand the housing supply.
The market is more concerned with other parts of the president’s agenda, most urgently getting clarity around which countries may be tariffed — and at what rate. That issue joins four others at the top of investors’ minds, Mohamed El-Erian told Yahoo Finance this week.
Aside from trade, they include energy, immigration, deregulation, and fiscal stuff like tax policy.
But El-Erian, president of Queens’ College at Cambridge University and an adviser to Allianz, said it will also be vital for Trump to address the K-shaped economy, an issue the veteran strategist has been highlighting for some time.
“The issue of dispersion or what a lot of people call the K-shaped economy, where the rich are doing better, but the poor continue to struggle — that was very well understood by President Trump,” El-Erian said. “And that is the reason why the electorate didn't appreciate the economic exceptionalism that everybody talks about.”
The vibecession, as we heard about last year.
Trump has made some early gestures in the direction of working on improving the fortunes of lower-income Americans, including the memo mentioned above. He told an audience in Davos that he wanted Saudi Arabia and OPEC to lower oil prices and said he would “demand” that interest rates come down.
But there’s another K-shape besides the “internal divergence between the rich and poor,” as El-Erian put it: the K-shape of the global economy, with another gap between the winning US and the losing China and Europe. It presents a second challenge for Trump since sustained US growth is unlikely to come at the expense of its allies and adversaries via tariffs and trade spats.
“Either we're going to level up the global economy, or we're going to level down the global economy,” El-Erian said. “And leveling up is a hell of a lot better than leveling down.”
This leaves investors with two questions. Just how big an upside can the US get from demanding things? But perhaps more importantly, and a lesson from Trump 1.0, is whether the "Art of the Deal" author's trade spats can end up merely as aggressive overtures to profitable deals that lifts all boats.