At the time of the presidential inauguration, the market debate was all about whether we would get 'Good Trump': the de-regulator, tax cutter, infrastructure builder, deal-maker; or 'Bad Trump': the protectionist, militarist, conspiracy theorist. The 2017 equity rally was at least in part fuelled by the evidence of Good Trump.

Perhaps the lesson to draw from the last two years is ‘do not try to predict Trump’.

Replacing National Security Advisor H.R. McMaster with John Bolton is the latest development which ticks more Bad Trump boxes than it does Good Trump. As a former US Ambassador to the UN, Bolton appears on paper to be a standard establishment appointment. In fact, Bolton's views as a staunch neoconservative prevented him from being confirmed again for the role due to opposition within his own Republican party. He has consistently expressed opposition to both international treaties and organisations and has aggressively advocated for a hard line approach to both North Korea and Iran. This includes making the case for a pre-emptive strike against North Korea and advocating tearing up the nuclear deal with Iran and working towards overthrowing its government instead.

 

Bolton’s appointment, though, is only the latest in a series of changes in the White House, where the more moderate influences have been weakened. From Larry Kudlow replacing Gary Cohn to Rex Tillerson replaced by Mike Pompeo, turnover remains high at the White House and it's largely the moderates who are shown the door. At the same time Trump appears to feel emboldened to pay less attention to his advisers and follow his own instincts instead. We can debate whether he fired his advisers to follow his instincts or he’s following his instincts because he fired his advisers, but it has coincided with the shift from Good Trump to Bad Trump and an even more ad hoc style of policymaking.

Hiring John Bolton is the latest development which ticks more Bad Trump boxes than it does Good Trump.

Perhaps the lesson to draw from the last two years is ‘do not try to predict Trump’. The pendulum has swung from Bad Trump to Good Trump and now back again, so it’s not too difficult to imagine another change in direction.

 

For now, however, I struggle to see any change in momentum of the pendulum and it feels premature to proclaim 'Peak Bad Trump'. It’s a useful reminder that the New Political Paradigm is not just about fiscal policy, but has some less equity-friendly expressions as well. On balance, however, I would still see our New Political Paradigm theme as equity supportive.