I mean this without a trace of sarcasm, not being a fan of the President’s or pretty much anything he stands for…
Donald Trump’s singular accomplishment, in my view, is the ignition of Animal Spirits in the stock market and the real economy. Small business confidence measures shot up from the week of his inauguration and have remained elevated ever since. PE multiples expanded throughout the course of the year, which was not solely due to his tax policy – it was also about his swagger and I-don’t-give-a-f**k persona.
The recent run in the stock market that began post-Thanksgiving should absolutely be attributed to the tax bill, which many observers had assumed would be pushed into the first quarter of the year. When the momentum became apparent, the S&P 500 began to price it in quickly, adding another leg of gains to an already strong year of returns.
If 2017 was The Year of Living Dangerously, as I discussed in November, then what might 2018 be?
I think there’s a chance that this coming year is the moment at which investors, CEOs, captains of industry, large funds and other allocators and spenders of capital drop all pretense of being scarred by the last crisis and get busy sowing the seeds of the next one. Maybe we’ll call it the IDGAF phase. Where anything goes and everyone lets it all hang out.
IPOs, blockchain announcements, mega-M&A deals, leverage, margin, CapEx explosion, growth initiatives, driverless cars, battery charging stations, commodity booms – all the things Wall Street has traditionally feasted upon when it’s in a bullish mood may be brought to the table in the coming months.
The fact that this could take place with interest rates in the US still at extremely low levels historically while the rest of the world continues to engage in outright stimulus and quantitative easing makes this possibility even more fascinating should it unfold. The incoming Fed Chairman is a Trump appointee so you know he’s already gotten the “loyalty” speech, if not from the horse’s mouth then definitely from Gary Cohn. We’ve already heard commentary from the Fed that they will not seek to counteract the President’s fiscal stimulus plan before it has time to make its effect felt in the data.
Does this sort of cooperation open the door to Dow 30,000? Nasdaq 10,000? Crude oil at 80 or 90? Unemployment at 3.5%? Year over year wage growth at 3% plus? CPI at 3% plus? A lending jubilee from the banks?
I don’t know for sure, but anyone that says “Impossible” isn’t terribly well-versed in the history of markets. We’ve seen a succession these last two hundred years of one impossible thing after another being toppled and then surpassed in rapid succession, just when everyone said no chance.
Obama in a million years could never have accomplished this. He was a re-regulator, not a de-regulator, which matched up precisely with what the country’s mood demanded at the time of his inauguration in 2008. Hillary’s tax cut, if ever such a thing had been proposed, would never have approached the brazen nature of this one, despite how Corporatist she was always accused of having been.
No, what’s happening now and what is to come is genuine Trump. For better (today), and then eventually for worse (who knows when, but there’s always a when).
You gotta hand it to him, he’s remade the world in which we live in under 12 months’ time. It’s undeniable.
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