CFOs Warily Optimistic About Trump

On the upside: tax breaks and the post-election rally in the stock markets. On the downside: Trump’s protectionist plans and his “shock-like” state...
David KatzDecember 13, 2016

It’s only a little more than a month since Donald J. Trump surprisingly won the presidency, and thus it’s much too early for CFOs to get a firm handle on how that result could affect their companies and their lives as CFOs. But that hasn’t stopped senior finance folks from speculating on the basis of the available facts about what the outcome might mean, interviews with finance chiefs reveal.

The mood? Call it warily optimistic.

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John Rainey, PayPal

Some CFOs had to look no further than the warm welcome with which the stock markets greeted the president-elect over the last month to feel good about the outcome. The market’s buoyant reaction “speaks volumes” of what might ensue for corporate America from a Trump presidency, as does the jump in consumer confidence, thinks John Rainey, the CFO of Paypal.

Looking more closely at what the effect on the online payments giant might be, Rainey suggested in an interview with CFO that the sector investment rotation favoring financial services that’s taken place since the election favors PayPal.

“It seems that America once again is enamored of the idea of fiscal stimulus, which we haven’t seen a lot of over the last several years, and that comes through in the prospect of a more favorable tax environment and things like that,” Rainey said.

Last month, Michael Ellis, the CFO of Flywire, a smaller payment solutions provider, gleaned a similarly optimistic outlook from the stock markets’ rally in the immediate aftermath of the election. “If you were awake [that] Tuesday night you saw that the futures were down almost 1,000 points — and all of a sudden, within 14 hours the market was positive and has stayed positive.”

Ellis feels that Trump’s success in business will help him keep the economy growing. “I think that what we can expect from this presidency is that he will insulate himself among good policy decision-makers because he doesn’t have the skill set and experience to manage in governmental organizations,” he says. 

Michael Ellis

Michael Ellis, Flywire

Ellis, who has worked in the private sector as well as in government (as controller of the Massachusetts Port Authority) claims to know the difference between the two. “In a private environment you can make a decision without a committee, and in government, it’s all in committee,” he said.

Thus, Trump will have to acquire a skill set applicable to the federal government, says Ellis, who thinks he will, “given that he’s managed multi-billion-dollar businesses. I’m not saying that he’s a very good businessman or a bad businessman, it’s just that he’s been at the top of very big enterprises — some successful, some not so successful.”

The president-elect “should have the acumen to understand that he’s got to surround himself with really intelligent people,” Ellis added.

Despite Rainey’s optimism about the prospects for growth in the U.S. economy, the CFO isn’t so happy about Trump’s advocacy for re-negotiating trade deals, erecting tariffs, and other forms of protectionism.

“For us at PayPal,” he says, “the unencumbered flow of goods and services across borders is vital to what we do. It’s paramount. And so of some concern is [the] protectionist stance that the new administration may be taking and how it may impede that. I’m hopeful that whatever happens there that we’ll continue to recognize the benefit of cross-border trade.”

On the other hand, Rainey sees a silver lining in Trump’s plan to cut corporate taxes on such things as the repatriation of the offshore earnings of U.S. companies to motivate them to bring that cash back onshore. “We don’t have a tax structure today that contemplates the global world in which we operate, and for us, more than half of our customers [operate] internationally,” the PayPal finance chief adds.

“It’s in our best interest to bring back dollars here to create jobs in our country, and I’m hopeful that the rules around repatriation will be more favorable so that we can provide that stimulus to the economy,” Rainey notes. It would also specifically benefit PayPal: “We’ve got about $6 billion in cash on hand and about five of that is offshore,” he said, using round numbers.

Other CFOs felt concern about the president-elect’s tendency to make divisive statements. “He should be moderate in his thinking; his history is more Democratic in his thinking than Republican, and he should maintain … discipline around shock-like statements, [which create] disruption in socio-political and economic arenas,” says Ellis.

Kathleen Philips, Zillow

Kathleen Philips, Zillow

A big worry for Kathleen Philips, the CFO of Zillow Group, an online real estate database company, is that the national divisions revealed in the presidential campaign will spawn a lack of trust in the economy similar to what transpired during the last recession.

Looking back at 2008 — God forbid we end up in a situation like that — it was an overall loss of confidence in the markets. Obviously there were some structural issues with the way mortgages were being written at that point, but the downturn cascaded because of a loss of confidence in the economy, which eventually became worldwide,” she recalled.

“There’s a lot of dissent right now, I think it’s fair to say. We are a divided nation. My hope is that it turns around as more concrete plans begin to form, because I don’t think we as a country can afford to remain as divided as we are at this moment. But if it does continue, I would fear and be watching for a loss of confidence in the economy and the nation as a whole,” she said.

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