The current US administration has faced numerous difficulties over the past few weeks, London-based fund manager Man FRM said in a statement, with numerous missteps undermining confidence in the president’s ability to enact his pro-growth agenda.
“The last six weeks have easily been the most chaotic of the Trump presidency so far,” the statement said.
“The failure of the health care bill has raised questions over Trump’s ability to enact his pro-growth agenda, and this was followed by a catastrophic mishandling of the far-right rally in Charlottesville which culminated in a mass walkout of CEOs from the White House business advisory panel.”
Additionally, Man FRM cautioned that support for Mr Trump within his own cabinet appeared to be slipping.
“Throughout the month the president became increasingly isolated from cabinet members – after a flurry of hiring and firing, those that still have a job appear to be cooling in their support,” the statement said.
For markets, these challenges have come at an “inopportune” timing, as Mr Trump must now deal with the threat of military action from North Korea, and the possibility of the US government hitting its debt ceiling (which limits the amount of money government can borrow by limiting the amount of bonds that can be issued).
Hitting the debt ceiling would put the country at risk of having its credit rating downgraded, which would make it more expensive for the government to borrow money; and typically the government has raised the ceiling whenever it risks reaching this limit to avoid this outcome.
Investors trying to make sense of all of these risks also face a number of challenges, the statement said, with risks around military engagement or even a potential nuclear strike difficult to forecast probabilistically.
“Nine times out of 10 your probabilistic forecast will be too low for, say, the equity market,” the statement said.
Despite this, the risks around “a complete failure of the Trump presidency” is more ‘normal’, and it’s these risks that will undermine Mr Trump’s pro-growth agenda.
“Given the deterioration of support within the upper echelons of the Republican Party, we have little confidence for either an advancement of Trump’s pro-growth agenda or a smooth resolution of the debt ceiling issues,” Man FRM said.