By Lucinda Shen
February 6, 2017

Goldman Sachs is turning bearish on Donald Trump.

In a Friday note to clients, a team of Goldman Sachs analysts led by Jan Hatzius wrote three reasons why the the economy’s economic future now looks a bit less bright. The reason: President Trump.

“Following the election, the positive shift in sentiment among investors, business, and consumers suggested that the probability of tax cuts and easier regulation was seen to be higher than the probability of meaningful restrictions to trade and immigration,” the team wrote. “One month into the year, the balance of risks is somewhat less positive in our view.”

In late January, Trump signed an executive order banning immigration from seven Muslim-majority nations. To Goldman, the order indicates that Trump could follow through on campaign promises to increase trade tariffs and limit immigration, moves that could disrupt the economy.

 

Secondly, congressional Republicans have had trouble agreeing on how to move forward with the Obamacare repeal. The in-party disagreements slowing the repeal process do not bode well for swift execution of Trump’s more growth-friendly proposals such as tax reform and infrastructure spending, the bank said.

That “reinforces our view that a fiscal boost, if it happens, is mostly a 2018 story,” the team wrote.

And lastly, Goldman notes that amid rising tensions between the Republican and Democratic parties following the election, issues requiring bipartisan support, such as Trump’s plan to generate $1 trillion in infrastructure spending, could get stuck in a gridlock.

Coming into the election, and shortly after, Goldman’s strategists issued warnings that Trump’s policies might be bad for the market. But as stocks rose, Goldman, along with the rest of Wall Street, seemed to largely dismiss President Donald Trump’s stance on immigration and trade, touting his more business friendly policies instead as good for investors.

Now, as CEO Lloyd Blankfein’s tone turns from optimistic to critical following Trump’s executive order banning immigration from seven Muslim-majority nations, economists at the Wall Street giant appear to be rolling back their hopeful take of Trump’s presidency.

The bank itself has done remarkable well since Trump was elected president. The commander-in-chief recently signed an executive order to pull back Dodd-Frank reforms while the Federal Reserve has said it expects three rate hikes this year.

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