After Trump's election, many strategists dusted off the broad outlines of Trump's policies and discovered that a few of them might help the economy in general and some businesses in particular. He wants to cut taxes, is not fixated on cutting costs, and has shown interest in more infrastructure spending. Except to bond investors, that didn't seem like a bad idea. He had also talked about less regulation, particularly Dodd-Frank regulations, and that made many financial types very happy. And maybe the energy industry wouldn't feel quite so under the gun.

However, conveniently forgotten were trade policies that are likely to provoke at least some retaliation, and immigration policies that might limit labor force growth, which is one of the pillars of GDP growth. In addition, the stimulus plan could create more inflation, which was already on the rise without the help of Trump. And, of course, there is the issue of implementing his policies, which a lot of new presidents have found surprisingly difficult.

Trump Will Likely Inherit an Economy That Is Losing Steam

I believe that the exact policies and winners and losers will prove to be just about as difficult to predict as who would win the current election. And even if all of those were clear, a lot of that would be priced into stocks and bonds. However, it is clear that a lot of clouds, perhaps not storm clouds, were gathering over the U.S. economy. A few weeks ago, we ran a chart of industries that were driving the economy and were clearly past their prime. We believe that erosion continues. The auto industry got some more bad news as Ford announced that it would temporarily idle four North American plants for varying periods during the fourth quarter. That could involve as many as 9,000 workers in the U.S. and 4,000 in Mexico. Auto sales appear to have peaked out, but production remained relatively aggressive until recently. Cutbacks in the auto industry will slowly trickle back to a lot of supplier industries. We note the weekly chain-store sales have shockingly gone into negative territory on a year-over-year basis. Business-related construction spending also looks worse than we had hoped, and billing by architects, a great economic indicator, continues to worsen. More broadly, measured on a rolling 12-month basis, GDP growth has slowed from 2.9% to 1.6% and taken employment growth with it.