by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with a sampling of the key executive orders President Trump issued immediately after being inaugurated to his new term in office yesterday. We next review several other international and US developments with the potential to affect the financial markets today, including a potential decision by Indonesia to cut nickel output amid slumping global prices and new data showing surging foreign investment in the US.

US Politics: President Trump was inaugurated to his new term in office yesterday, dominating the news media around the world. Importantly, he also hit the ground running, signing multiple executive orders aimed at putting into place his agenda regarding international relations, the economy, and other areas. Of course, many of the actions will be challenged in court, but for now, we think it’s useful to highlight a sampling of the ones that could be important for the economy and financial markets. Key orders:

• Directed federal agencies to begin an investigation into international trade practices, including persistent trade deficits and unfair currency practices, and to examine the flows of migrants and drugs from Canada, China, and Mexico to the US. (Even though Trump’s orders didn’t include new tariffs, such investigations could help set the stage for tariffs in the coming weeks or months.)
• Launched a full review of the US industrial and manufacturing base to assess whether further national security-related tariffs are warranted.
• Declared a national energy emergency (the first in US history), which could unlock new powers to suspend certain environmental rules or expedite permitting of certain mining projects.
• Rolled back energy-efficiency regulations for dishwashers, shower heads, and gas stoves.
• Froze federal hiring, except for members of the military or “positions related to immigration enforcement, national security, or public safety.”
• Restored a category of federal workers known as Schedule F, which would lack the same job protections enjoyed by career civil servants.
• Ended the federal government’s remote work policies and ordered workers back to their offices full time.
• Barred asylum for migrants newly arriving at the southern border.
• Prohibited federal employees from issuing citizenship documents to the children of illegal immigrants, despite the birthright citizenship provisions of the 14^th
• Withdrew the US from the Paris Agreement on climate change, eliminating the country’s obligations to take action against global warming.

Global Politics: Whether by coincidence or not, the World Economic Forum’s annual conference in Davos, Switzerland, kicked off yesterday. As usual, the list of attendees included a who’s who of global elites, including powerful politicians, business leaders, economists, and commentators. President Trump is due to address the forum via video on Thursday.

Global Pharmaceutical Industry: Researchers following 215,000 US military veterans who have diabetes and use the popular new GLP-1 weight-loss drugs found they were significantly less likely to develop Alzheimer’s and about 40 other diseases, compared with those taking other diabetes medicines. The data could be a new shot in the arm (sorry for the pun) for firms such as Novo Nordisk, maker of Ozempic, and Eli Lilly, maker of Mounjaro, since investors have recently begun to worry about future growth and government support for those drugs.

Indonesia: The government is reportedly mulling a cap on nickel ore production to boost prices amid a global slump. Even though the government has taken strong steps to boost the country’s nickel industry in recent years, global demand has been falling as the demand for electric vehicles falters. Global nickel prices have declined some 40% over the last two years.

Taiwan: The opposition-controlled legislature today froze large portions of the country’s defense budget, throwing a wrench into President Lai’s effort to strengthen the island’s defenses amid concerns about a potential Chinese takeover attempt. According to the China-friendly Kuomintang opposition party, the defense spending is “wasteful,” even though it only amounts to less than 2.5% of Taiwan’s gross domestic product. The funding freeze is likely to draw anger from the new US administration, which wants other countries to boost their military spending.

United States-China: The US law aiming to force Chinese-owned social media app TikTok to either sell itself or shut down went into effect over the weekend, but only temporarily. By Sunday, the app was back in service after President Trump promised to issue an executive order giving the firm more time to separate from its Chinese owner. The reprieve is likely to be taken positively by Beijing.

US Investment Environment: New research by the Financial Times shows the US has become the world’s biggest recipient of foreign direct investment, accounting for 14.4% of the world’s total in the year to November. The research shows that the US is now drawing in several times more investment that China. The US economic industries luring the most investment include real estate, software and information technology services, and industrial equipment. As we’ve noted before, strong capital flows into the US go far toward explaining the strong dollar.

US Semiconductor Industry: Taiwan Semiconductor Manufacturing Corp. late last week said it has begun commercial production of advanced semiconductors at its new, multibillion-dollar campus in Phoenix. That marks the first time 4-nanometer chips (the kind used in smartphones and other popular electronics) have been manufactured on US soil. Importantly, the firm also said that yields at the Phoenix fab are already comparable to those at its famous plants in Taiwan.

• As a reminder, the Biden administration strong-armed TSMC into developing its new $65-billion campus in Phoenix to help secure the US’s access to cutting-edge computer chips. Some 10% of the facility’s cost was subsidized by the CHIPS and Science Act of 2022.
• However, officials close to President Trump have criticized the CHIPS and Science Act, making unclear whether the government will continue to subsidize advanced chip manufacturing in the US going forward.

US Energy Industry: The Wall Street Journal today carries an interesting article showing that major oil and gas companies are considering getting into the power-generation business. The firms reportedly want to take advantage of the surging demand for electricity, especially for data centers running artificial-intelligence models. The energy firms are considered well-placed to build off-grid, gas-fired generating plants to supply those data facilities.

View PDF