QOTD: What would stocks do if Trump resigned

What would US stocks do if President Trump suddenly resigned?

Based on recent price action the answer is clear: rally 3-5%, at least, over a day or two. The reasoning here is simple. US equities see through the headlines (like the Comey firing) and essentially believe two things. First, corporate earnings are growing nicely. Second, the Republican-led Congress needs to pass tax reform by the 2018 midterm elections. As for who sits in the White House, markets will favor anyone who can push item #2 to a speedy conclusion while not screwing up #1. OK – one more (half a) thing: long term interest rates are going nowhere, fast. As long as markets believe those 2 ½ drivers remain in place, US stocks will (very) slowly grind higher.

And it isn’t just the market’s response to Tuesday’s headlines that make us say that. Our monthly look at sector and asset price correlations supports the thesis. Average S&P large cap sector correlations dipped in the last month and are averaging just under 60% YTD. That’s a clean 20 points lower than the 2009 – 2016 experience and shows fundamentals now matter again. But you don’t need a “Trump” card to play this game.

- Nicholas Colas, chief market strategist at Convergex, a global brokerage company based in New York

Smile When You Say That, Mr. President (Convergex)

Josh here – not sure I agree, but the work Nick’s team has done on correlations dovetails exactly with what I’ve been saying – that the Trump Trade, if there ever were such a thing, ended 5 months ago, and the new reason for bullishness has become plain and simple earnings growth – the best growth quarter in years for the SPX companies. Has nothing to do with Trump, it was already in the works as we lapped the oil price crash.

As Nick explains, “While we haven’t seen any major brick and mortar retailers report (that’s next week), FactSet is showing a 13.5% growth rate for Q1 2017 S&P 500 earnings versus last year.  That’s the best comp since Q4 2011.”

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. 사설토토 commented on Dec 24

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2017/05/11/qotd-what-would-stocks-do-if-trump-resigned/ […]

  2. Study in Uganda commented on Jan 05

    … [Trackback]

    […] Information to that Topic: thereformedbroker.com/2017/05/11/qotd-what-would-stocks-do-if-trump-resigned/ […]

  3. software testing services company commented on Jan 15

    … [Trackback]

    […] Find More Info here on that Topic: thereformedbroker.com/2017/05/11/qotd-what-would-stocks-do-if-trump-resigned/ […]

  4. kimber guns for sale commented on Jan 18

    … [Trackback]

    […] Read More Information here to that Topic: thereformedbroker.com/2017/05/11/qotd-what-would-stocks-do-if-trump-resigned/ […]

  5. AWS DevOps commented on Feb 07

    … [Trackback]

    […] Find More here on that Topic: thereformedbroker.com/2017/05/11/qotd-what-would-stocks-do-if-trump-resigned/ […]