NADAês take: Economic and market impact of the election
NADA Chief Economist Steve Szakaly, an expert at seeing how economic trends will affect auto dealers, offered the ups and downs of the impact of Trumpês election on the economy.
Szakaly described the immediate downturn in the stock market as a reaction to fear and uncertainty, not to economic fundamentals. Stock markets hate uncertainty, and nothing could be more uncertain than a surprise presidential victory or than Trump himself. He has often contradicted himself and has offered few specifics on his policy agenda. But Szakaly believes the markets will quickly recover from the initial shock of the election.
Markets may well continue to react poorly in the short term, Szakaly said. But the more important short-term economic indicator certainly for auto dealers is consumersê reaction, and he expects them to be willing to spend.
Both happy people and sad people tend to spend more as long as they have jobs and unemployment is at historic lows, said Szakaly. Most likely, economic activity will continue at the somewhat moribund rate we have seen of late.
Szakaly thinks some of Trumpês stated policy objectives will help the economy lowering corporate taxes, increasing infrastructure spending and cutting back on business regulation. Attention to infrastructure has the added benefit of support from the Democrats, which many of his proposals will not.
On another business issue, Szakaly pointed out, as others have, that it would be very hard to repeal NAFTA, the North American Free Trade Agreement. These trade deals are complicated and require exit negotiations, he said. Many Americans, including many in the auto industry, depend on business in Mexico for their jobs. The Detroit automakers have moved their small-car production to Mexico to make those low-margin cars cost-efficient.
Szakalyês conclusion: If increased infrastructure spending happens and certain tax cuts materialize, it will mean a better long-term outlook than whatês in front of us at present.Download Bulletin PDF