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Will Donald Trump’s primetime speech to Congress tonight be full of sunshine and infrastructure spending, or doom and protectionist gloom?

Investors are currently holding their breath to see whether the president uses the spotlight to deliver the pro-business policy specifics they have been craving, or double down on divisive social issues that could divert political attention.

Here are what analysts are forecasting for tonight’s speech, and how that could play out in the markets.

Promises, promises

Investors have found a lot to like about Mr Trump’s campaign promises to slash taxes, streamline regulation and lavish as much as $1tn on infrastructure programmes. But during his first weeks in office, details of these corporate-friendly policies have taken a back stage to controversial moves on topics like immigration.

Which one will get the most air time tonight? Investors certainly know what they’d like to hear — details on infrastructure spending, regulatory overhaul, healthcare reform and other business-friendly policies.

Sadly, that may not include one of the business community’s favourite topics: tax reform. According to ING Group economist James Smith:

Comments from the President yesterday suggested that he is not in a position to provide greater clarity on tax plans at the moment, but it is possible that we get a commitment to ‘big’ infrastructure spending. This might just be enough to get $ bulls excited.

And, as the saying goes, sometimes it’s not just what you say, it’s how you say it, add TD Securities analysts:

A positive, upbeat message would be positive for markets — particular one that suggests agreement among Republicans on key policy initiatives. A sombre, negative or combative tone is more likely to be negative for markets, all else equal.

Risk-on, or risk-off?

Since the election in November, major US equity indices have hit one record high after another as investors poured into stocks. Much of that enthusiasm has been predicated on optimism that Mr Trump can, and will, deliver on business-friendly campaign promises. But what happens if he shifts the focus instead to, say, his controversial travel ban?

FXTM research analyst Lukman Otunuga says:

Although some participants remain cautiously optimistic over Trump providing further insights into his economic policies, the threat of today’s speech mirroring the inaugural address could trigger a tidal wave of risk aversion. Global markets have been somewhat patient and even resilient against the persistent Trump uncertainties, but the crack could start to show if nothing new is brought to the table.

Watch out, Asia

US markets will be closed during Mr Trump’s speech. But depending on what he says, the immediate reaction could mirror that of election night — when Mr Trump shocked political pundits and forecasters by overtaking rival Hillary Clinton in the electoral college, sending US futures plummeting and rattling Asian markets before rebounding when America finally woke up to a new president-elect. As TD Securities analysts put it:

Note that the first reactions to his remarks will come in relatively illiquid Asian markets. This creates a risk for wider market moves on the tone of the speech and any surprises.

The art of the deal

Even if the speech is light on details, Mr Trump may still get a positive market reaction if he sounds like he’s ready to negotiate, TD Securities analyst say:

In fact, markets likely would give more importance to an assertion by Trump that Republicans are on the same page and are working together on tax reform and other economic issues. Conversely, signs of some more fundamental disagreements between Congress and the administration would be disconcerting for markets.

Head for the havens?

The tone Mr Trump strikes could cause a flip-flop in the dynamic between assets perceived as safe havens — like gold — and riskier investment classes. Saxo Bank’s head of commodity strategy Ole Hansen says:

Promises are one thing, delivery of those promises is another thing entirely. The Trump trade has reflated somewhat in recent weeks, with the dollar rally and bond selloff both losing some steam. On that basis, the market will be looking for specific details on infrastructure spending, tax, healthcare, the wall and how to fund these plans. A failure to move beyond his usual rhetoric could see the dollar punished, while providing additional support to the underlying demand for gold and silver that has been seen during the past month.

Copyright The Financial Times Limited 2019. All rights reserved.

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