Quantum theory holds that everything that can occur happens at the same time until observation fixes the outcome. The observation is not only determined by the perspective of the observer but also by the precision of the observation. Since each event subsequent to the first observation plus/minus its margin for error determines one or more subsequent events, we can envision a broadening cone of future events through time determined by that first observation.
It does seem rather hapless to make any prediction based upon the current state of uncertainty in these early days of the Trump presidency, the liberal revolt against it, and Brexit’s uncertain effect upon the UK and the EU. That said, let’s venture to do so with an admittedly large margin for error from the perspective of an American medical device company bringing a new product through the F.D.A. approval process and into the domestic and ultimately the world market.
The pluses. The hold on the medical device tax and President’s Trump stated intent to ease regulatory burdens and reduce corporate tax rates favors development and production. We see the U.S. stock market is hitting new highs in anticipation of these favorable changes with $2.9 Trillion USD added market capitalization. Uncertainties regarding EU survival and stability and even the terrorist threat from open borders favors foreign investment in U.S. Companies as a safe harbor. Companies with overseas funds may be able to repatriate overseas cash without onerous tax burdens to spur domestic production and hiring. If jobs are created, the velocity of money will increase to allow an increased and ready market for the purchase of newly produced products.
The maybes and minuses. First of course, is the general uncertainty which tends to have a dampening effect on investment. Even if the lowering of the corporate tax rate is retroactive, it will be a minimum of a year before it has enough effect on earnings to justify the current stock multiples and valuations. It is predictable the stock market will have a substantial correction upon the news it has anticipated and priced in as the changes slowly filter down to corporate bottom lines. The strength of the U.S. dollar and the possibility of tariff wars may not bode as well for international sales. Rising interest rates may also add to inventory costs.
So how do we assess this grab bag of uncertainties? We guage the environment as more positive than negative for domestic sales, corporate profits, regulatory approval times, stock prices, and investment. And after the anticipated intermediate market correction, we believe the investment environment should be substantially improved without likelihood of any substantial downside for U.S. medical device companies in 2017 and 2018. Time will tell, but this seer is currently wearing rosy glasses.
