Trump’s tax reform is the tipping point for the future of the world

Photo credit: Gage Skidmore

On a macro level, Trump’s tax reform is the topic of the moment. Basically, if approved, it will be positive in the short to medium term, but it will raise high risks for the future of the world economy. The fiscal program seems designed in a way that will increase the deficit. If not approved, then the political landscape will remain a huge swamp and markets will just keep dragging on.

Trump’s tax reform will most likely raise imbalances, especially in two main points: debt and foreign exchange. Moving the needle, without keeping some balance, in these two variables, is likely to fuel bubbles. In other words, the short term should bring high equity returns, while the long term might see another financial calamity.

The playbook for this scenario is simple. Follow the trend in the short term and setup an exit strategy for the long run.

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