Saturday, November 18, 2017

Here's what Donald Trump's election could mean for the economy in Tampa Bay and Florida


Down in the polls not long ago, Donald Trump predicted his unconventional election as president would be "Brexit times 10."

From an immediate shakeup in the stock market to heightened anxiety over an economic downturn, he may have been right.

In an exponential reaction to Britain's exit from the European Union, Trump's election has triggered predictions that trade, tourism and international growth all could be stifled — a scenario with deep implications for the Tampa Bay economy, which relies on both foreign visitors and foreign investment.

Some are heartened, however, such as those in the banking and real estate industries who believe regulations will be pared back with the legislative and executive branches in Republican control. Trump's promise of a short-term stimulus for infrastructure could help generate jobs but also fuel inflation.

The markets, which had anticipated Hillary Clinton's election, initially plunged in pre-market trading late last night when the results turned toward Trump. Throughout Wednesday — as investors repositioned their portfolios to capitalize on underpriced defense, health care, and financial stocks expected to do well in a Trump administration — the Dow Jones Industrial Average more than recovered to close up 1.4 percent.

Market watchers could not be more divided on what happens next.

"A Trump presidency is an unanticipated — and unwelcome — outcome in the eyes of financial markets, so we'll see a large and immediate pullback globally and a flight to quality. Expect a 10 to 15 percent stock market pullback over the next few weeks, a sharp drop in long-term interest rates, and the Fed to remain sidelined next month," chief financial analyst Greg McBride said.

"The shock of this outcome makes Brexit look like a picnic, and it is. The reverberations of this could bring the onset of recession in 2017."

On the opposite spectrum is Joseph Cotton, publisher of the investment newsletter Cotton's Technically Speaking. Cotton said he knew the market would surge after Trump vowed to seek reconciliation in his early morning victory speech. And, unlike some prognosticators, he thinks the bull market "still has legs."

Steve Athanassie, a financial adviser with ProVise Management Group in Clearwater, agrees there are global concerns particularly when it comes to trade. But he disagrees that a Trump presidency will necessarily usher in a recession. That's because, he said, all three of the big "e"s are improving: the economy, employment and corporate earnings.

"President-elect Trump is coming in to a much better situation than Obama did eight years ago… It's like taking a team to the Super Bowl and discounting what the other coach did," Athanassie said, drawing a parallel to the Tampa Bay Buccaneers winning the Super Bowl under coach Jon Gruden after former coach Tony Dungy had put many of the pieces in place.

Scott Brown, chief economist with Raymond James Financial in St. Petersburg, does not expect an immediate jolt to the bay area's economy. "The job market has been doing very well with wages starting to pick up and that's likely to continue in the near-term," he said.

Some of more worrisome impacts, particularly in trade and immigration, may unfold gradually over many months, if not years.

The buzzword of the day in Tampa Bay business circles Wednesday was uncertainty.

"There is a high level of uncertainty and anxiety of what is to come," said Rick Homans, CEO of the Tampa Bay Partnership. "The Trump agenda will only become clear once he starts to govern."

"We are faced with a great unknown at this point" added Tampa business leader Rhea Law, head of the Buchanan, Ingersoll & Rooney law firm in Florida. The unknown, she said, is often met with fear and pessimism.

At the Tampa Hillsborough Economic Development Corp., CEO Craig Richard said lack of clarity about what a Trump presidency means may prompt businesses to "hit the pause button" on investment and strategic decisions to expand or relocate. But he cautioned that he has not seen any concrete examples of such actions so soon after the election.

"That is my only caution. But as an economic developer, I am an eternal optimist. Once businesses get their bearings, things will stabilize and we will be off to the races," he said. "All this is fresh. People are trying to understand what it means."

Brown, of Raymond James, said the uncertainty stretches into how Trump will interact with Capitol Hill. "It's unclear whether Republicans in Congress will rein him in and prevent him from doing a lot of scary things, like tearing up trade agreements, which would be very distressful," he said.

Here are some of the potential economic impacts with the presidential transition:

• A climate of strong trade protectionism, including dismantling the North American Free Trade Agreement (NAFTA) are imposing high tariffs, is "one of the biggest risks" on the horizon, said University of Central Florida economist Sean Snaith. With tourism and trade, "there are all sorts of tentacles to this that weave themselves into Tampa Bay's economy. This is bigger for us than Brexit certainly."

• A tax cut that benefits primarily the wealthy will likely be embraced by the Republican Congress early on, including repealing the 3.8 percent surtax on investment earnings for high-income taxpayers.

Florida retirees had best be prepared to adjust their portfolios, said Helen Huntley of St. Petersburg financial advisers Holifield Huntley. "Some of the tax changes might even be retroactive to 2016 returns, which means year-end tax-planning will involve more guess work than usual and the start of filing season might be delayed as the IRS scrambles to revise forms and software," she said.

• Trump is likely to have the Republican majority votes to repeal Obamacare, though it's unclear what it will be replaced with, roiling insurance markets and potentially stripping health insurance coverage from 28 million people. "Even if there's a partial replacement, we're likely to see significantly more uninsured, which will be negative for hospitals and other health care providers serving that population," Huntley said.

• Some additional fiscal stimulus is expected for infrastructure, but it's unclear whether that money will flow into Florida.

• Some regulations imposed on the financial industry may be rolled back which could be a boost to profitability of banks and other financial institutions but eliminate some consumer protections.

• Robert Stern, a real estate attorney with Tampa's Trenam Law, said Trump's development background, knowledge of government regulations and ties to Florida all bode well for the state's real estate industry.

"Real estate is cyclical and there is only so much a president can do to move the dial,'' Stern said, "but I am expecting less regulation, quicker development time, easier liquidity in financing and a positive real estate market in Florida.''

• The National Retail Federation and other consumer organizations that track spending don't account for election results in their annual holiday spending projections, said retail analyst Jeff Green. He projects a moderate increase in holiday sales this year, less than the 4 percent bump the NRF anticipates.

He said that the election will likely have little effect on shopping patterns in the short term.

"It's a wash. The half of the country that voted for Trump might feel more confident to spend more during the holidays, but they tend to be more moderate or middle class spenders," Green said. "The higher income demographics that voted for Clinton will spend their money how they spend it, regardless of the election results."

• Tourism boosters across the country and in Tampa Bay worry that a Trump administration could make it tougher for visitors to get in and out the country. But it's too early to know for sure, said Santiago Corrada, president and CEO of Visit Tampa Bay, Hillsborough County's tourism arm.

"We're going to have to wait and see. We have such a global economy now, that tourism is dependent on currency values across the world. If the dollar is weaker in this market, it's good for international travel because it balances out the currency differences," Corrada said.

Previous coverage: Could a Donald Trump victory scare foreign tourists away from Florida and Tampa Bay?

Corrada added that tourism boosters will be looking to its two national lobbying groups, Brand USA and the U.S. Travel Association, for guidance on how the tourism industry could work with the incoming Trump administration.

During President Barack Obama's tenure, Brand USA, an agency created to promote international travel to the United States, launched in 2010 with the goal of bringing 100 million international travelers and $250 billion from them by 2021. The tourism industry also benefited from Obama's effort to jump-start a 10-year visa program between the United States and China in 2014. Before that, only one-year visas were available.

"When George W. Bush was elected and when Obama was elected, there was a lot of emotions that came into play," said Patrick Harrison, chief marketing officer with Visit Tampa Bay. "Similar to what happened in the U.K. with Brexit, we're seeing this initial emotional response. There's a lot of confusion from international tourists about what's happened in America. But no matter who is in office, our beaches and our attractions will always be places people want to go to."

Tourism officials from Pinellas and Hillsborough counties watched the election results roll in from London this week while attending the World Travel Market convention, one of the largest tourism conferences in the world. There, David Downing, the executive director of Visit St. Pete-Clearwater said he spoke to dozens of concerned tour operators and travel agents.

"There was concern about the immediate aftermath and whether or not this will be an image program for America, and if it will have a softening effect on travel," Downing said. "That can be very real."

Mekael Teshome, a PNC Financial economist who tracks Florida, separated the impacts of the Trump election into three stages. Immediately come the effect on the markets, which could hurt many Floridians who rely on investment income.

In the second stage of 2017, he said, comes the increase in deficit spending and upward push in inflation, which could weaken consumer spending.

Longer-term come the implications on trade and immigration, both of which would be a net negative for Florida, Teshome said.

"We depend a lot on foreign trade. That could increase costs and affect the flow of trade into Florida," he said.

"With immigration, it could affect the labor supply in the region. And the immigrants are not only workers but consumers as well."

Only time will tell, however, how much of Trump's platform on the campaign stump turns into policy. "My guess is the rhetoric of the campaign trail probably is not going to be the reality," Teshome said.

Part of the prognostication problem is that Trump has not spelled out how he plans to achieve many of his objectives. "He hasn't been very big on details, just 'It's gonna be great,'" said UCF's Snaith. "You've got to translate that into legislation and that requires specificity."


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