There’s only one dictator in the US – and it’s not Donald Trump

So that was that.

In the first really big speech of his administration, Donald Trump didn't say anything deemed outrageous last night. In fact, compared to his record so far, it was downright diplomatic even conciliatory.

America's going to be great. Loads of new roads and bridges, better healthcare and schools, lower taxes, and a large but tastefully decorated wall along the shared border with Mexico.

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The trouble is, despite the change in tone, we've heard all that before. It's one thing to say all this, and quite another to put it into action.

And the market can only run on hope for so long...

Trump tones it down

Tone-wise he played it safe. It was the "presidential" Trump we got on the day he actually won the election, as opposed to the"campaign mode" Trump we've seen a lot of since then.

He wasn't apocalyptic. He was still "America first" in content, but he was more about finding solutions than complaining about how everyone else had created the problems. That's a good sign. It shows that he's not unhinged. He knows when to get serious.

And there was nothing new in there: lower taxes, better systems, infrastructure upgrades, and all the rest. However, what the speech did lack is any real idea of the practicalities or timescale of realising Trump's aspirations for America.

The plan seems to be roughly as follows (with much help from a note from Paul Ashworth at Capital Economics). Trump wants to get the healthcare stuff sorted first. That'll use up a fair bit of political capital. It'll also take time.

Then he wants to sort out the tax cuts. But those look like they'll have to wait until healthcare has been dealt with. The hope was to have a preliminary budget in May, but getting agreement on that might be difficult. So actually implementing the cuts might end up being bumped back to next year.

Meanwhile, Trump is looking to spend $1trn on upgrading America's infrastructure, using a mixture of private and public funds. Trouble is, as Ashworth points out: "There is absolutely no way that Congress is going to agree to what could amount to $500bn in additional Federal infrastructure spending We suspect that ultimately all we will see is a limited programme of tax credits offered to private firms, which largely go unused."

This brave new era of rampant stimulus and floods of money is starting to look like it might run into some teething troubles. Indeed, it might run aground entirely. And you have to wonder what an overexcited market might do then.

Much as the focus on Trump might have given the impression that he has near-dictatorial powers, that's very much not the case. Like any other democratic leader, he has to carry a lot of other politicians with him. And there's no guarantee that he can do that.

The real seat of economic power in the US

And yesterday, it was in top market-moving form. The Fed via speeches from both the head of the New York Federal Reserve Bank and the San Francisco Fed hinted strongly that an interest rate rise might be coming as soon as this month.

As Kathleen Brooks of City Index points out, this time last week, the market thought there was a 34% chance of a March rate rise. Now it thinks that's 80%.

That has put some "oomph" back into the US dollar, which is higher today, and has also sent bond yields lower (and bond prices higher). It's also very interesting politically.

If the Fed does decide that it's time to raise rates, then Fed chief Janet Yellen is effectively handing over to Trump on the assumption that the US government will pick up any slack. In other words, there's a bit of pressure there for Trump to follow through on government spending promises.

If he doesn't, then it makes life even trickier for markets. If the Fed continues to raise interest rates and the government doesn't come through with the sort of free spending that everyone expects, what's going to hold share prices up?

It's as if the Fed is playing a game of chicken with the Trump administration. What's the likely outcome?

Well, I find it hard to believe that Yellen will allow the stockmarket to fall by much. If there are signs of a panic in the market, then she will try to arrest it by back-pedalling on rate promises (just as happened last year).

But the US has already priced in so much optimism about life under Trump that I'd continue to avoid the US market in general in any case.

A better bet might be the biggest target of Trump's ire so far Mexico. Latin America expert James McKeigue has looked at how to invest in a rebound in Mexicoin the latest issue of MoneyWeek. If you're not already a subcriber, sign up now.