Not sure if this is the right subforum - but my question is, with all the issues with the Trump presidency only a couple of months in (ongoing Russia inquiries, AHCA failure, low approval rating, many unfilled positions, etc.) and all the uncertainty you would think they would entail, why is the stock market still doing so relatively well since Election Day?
My guess, because he’s a (currently) a republican, so he should be good for business and, while I didn’t pay very close attention, I assume he made a ton of promises that should bolster business, in theory anyways, or at least sound like they would. Couple that with businesses making forward looking statements that the market buys (and sells) on and the market, in general, is extremely short sighted.
So, Trump says ‘I’m going to lower business taxes’, then in their earnings statements they can say ‘we look forward to reinvesting the money from the tax cuts back into [dividends/buying back stock/hiring new employees/building more stores/paying off debt/etc]’ and investors can buy stock based on that, even before anything has happened.
Remember, no one (that I know of) has released any earnings reports for business done while Trump has been in office. The first ones will start coming out next week. And has he even done anything that would change the business landscape, other than mention something about buying domestic steel?
Having said all that, I’ll agree, the market has been doing well this year.
OTOH, 3 months isn’t really a lot of time either. Bulls will call it a bull market, bears will say 'it’s about to fall apart, it’s almost time for a major correction, get out now!!!"
Take a look at any of the major indices. They’re up for this year, but also up for the last year or 3 or 5 years or even 10 years (if you look past 2009).
The way I see it, the only way the market really seems up this year is if you compare it to the last half (or so) of last year. But the market always goes down during times of uncertainly, like when there’s a messy election.
First of all the market has been overall pretty flat for the past month plus.
Second of all the relative rally since the election is shallow compared to other recent rally periods. S&P 500 for example is up about 11% over the past 5 months and was in comparison up 26% in the 5 months 3/31/09 on. More recently it went up about 16% between 2/2/16 and the five months that followed … all while HRC was the odds on favorite to be the next president.
But yes investors have piled in on the expectation that the combination of a GOP Senate, House, and Presidency will lead to business friendly tax reform and freedom from onerous regulations that impede profits just to do things like provide food and drug safety and limit pollution. (Regulators that hate America, ammiright?) Problem of course is that they’ve now priced the expectation of these happening into the market. If they en masse start to doubt they will occur …?
The overall rally from Feb 2016 on has been based as much as anything else though on decent macroeconomic data. Good growth and unemployment numbers and good earning report predictions … all that had nothing to do with Trump.
The president has much less to do with the economy than most people think. Government/military budgets are up to Congress, as are most industry regulations and taxes. The individual states also have a huge control over their own economies, effecting the nation as a whole.
And every President claims credit for it. (Obama probably has more practical claim to it than most others, being that he presided over and actively promoted the recovery from the Great Recession.)
I have absolutely no doubt that Trump will take credit. And I do mean absolutely.
Because the overall economy is on good footing and there is anticipation that any or all of the following will boost it further:
Deregulation
Government spending binge
Corporate tax cuts
Absence of any of those things will not hurt the economy but will take some steam out of the market rally because it is currently pricing in all of them happening down the road.
I think Trump will be very bad for long-term economic health and am surprised to see the stock market rising. Yet it has risen.
I think you guys are in denial, trying to deflect any credit from Trump! I like that sentiment, but let’s not engage in Alternate Facts like he does.
The market is up 14% since its pre-election low, and that low was not too far from its all-time high. Since the election there have been 22 days that the S&P 500 Index set record highs (though none in March).
It’s disingenuous to compare this market with the bull market which began March 2009, since that followed the worst market collapse of our lifetimes.
I’m gonna throw a flag on this play for choosing start points conveniently.
This run up is a bit unusual. Choosing to use examples from 3/31/09 - the month things bottomed out on the greatest decline in modern history - and 2/2/16 - following the worst start to a year in recent history - is just invalid as a means for showing soi-disant ‘normal’ behavior.
Yes, if there’d been a sharp decline in 2016 leading up to the recent charge there might be some argument there. However, absent that, this run up is unusual.
And I’m going to move this over to IMHO. I think it’ll do better there than Elections.
First, the market has risen quite noticeably since Trump was elected. Not much since he was inaugurated, but obviously the market knew that would happen once he was a elected, so it doesn’t make any sense to limit the window to any time after the outcome of the election, a somewhat market-surprising fact, became known.
The market does not take stuff like Russia inquiries, low approval, many unfilled positions etc. as seriously as anti-Trump political junkies do, not very seriously at all by any evidence so far. It was somewhat more noticeably sensitive to the AHCA failure. Probably not because any likely change in the health care system in the US would have a big (and easy to predict) effect on stock values, but because it suggests Trump/Congressional GOP’s problems getting things done where the impact on stock values might be greater, namely tax reform. But regulatory reductions are probably going to happen, and that’s good for stocks on the weighted average kind of horizon the stock market looks at (it’s fair to debate the effect in the much longer run, for example climate related stuff).
Also though there’s been considerable evidence of improvement in economic conditions outside the US. The US economy’s situation, on the actual data, is not much changed, it’s mainly some expectation of improvement, partly attributed to still likely Trump/GOP politices: like it or not I think it’s hard to escape that conclusion if asking the question ‘what does the market think?’. But outside the US there’s been somewhat better actual data recently. That’s not the reason the US market rallied ahead of foreign markets in Nov-Dec 2016, but it’s probably why foreign markets have outperformed US in 2017 so far, and the positive effect of a better world economic backdrop is probably among the reasons the US market has still added slightly to its post election 2016 gains as of today, rather than giving any back.
One thing of note from Paul Krugman: The rally is not broad. It is mostly in financial stocks.
Presumably this is due to the expectation of loosening of financial regulations that went in after the mortgage crisis.
The graph there is just November 2016 (the month during which Krugman when asked when the market would recover from the initial sell off the night of Trump’s victory, said ‘never’ 
). But it’s not his fault if someone uses outdated data. From election to now the XLF ETF, financials, is up around 22%* (just graphing on Google Finance, can’t link directly to that, but it’s easy for anyone to do). SPY, the whole S&P ETF, is up around 13%. XLF is 14% of SPY by market cap, so SPY ex-financials would be up around 10-11%. IOW financials are the leader but no longer represent most of the whole rally in the S&P as they did at first.
Financials are up more at least in part, most market commentators think mostly, because rates are higher. It’s harder for banks to make money at very low absolute rates. In that case regulatory expectation is probably secondary.
*those are prices not including reinvested dividends but for rough comparison it should do.
I’m not seeing what the President has to do with stocks. And therefore, I’m not really seeing anything that needs to be explained. The markets would probably look broadly similar today whether Gandhi or Hitler (or Clinton or Trump) had been sworn in on January 20th.
Really? Because nothing that a president has ever done has affected how businesses make money, and thus their value?
It’s not just financial stocks, all sectors seem to be doing well.
I don’t disagree with the list, or anything else, it’s just that the market shows an optimism that much of the rest of the world doesn’t share.
1 Yes, see my previous post for details. Krugman was commenting on the rally only through November 2016, back then. Up to now it’s a pretty broad based rally.
- I wonder what you mean by ‘rest of the world’. As for markets outside the US, they did not rally much in late 2016, but have outrun the US market in 2017 so far, after the US market has outperformed nearly all others since the bottom in 2009. So it’s not really ‘rest of world’ markets disagreeing. And as I noted in first post, economic data outside the US has also generally gotten better lately, in contrast to US data of the current economy which is not consistently better than before the election. Stuff like consumer confidence in the US is up markedly since the election, but direct real economy measures like GDP or jobs growth not a lot different.
If ‘rest of the world’ is people in the US grumpy about Trump winning, well represented here :), then yeah, it’s hard for them to understand why the market is happy, as thread demonstrates. For ‘the rest of the world’ than them, there are two reasons to bid up stock prices: 1) intended policies which would tend to boost stock prices, albeit not enacted, completely denying that is just letting your politics blind you, IMO, and 2) better world ex-US economic picture though latter has nothing to do with the US political system.
But obviously just because the market goes up on reasonable expectations doesn’t mean it’s ‘right’. Things might turn out much less favorably, then it will go down. The eternal problem is outguessing the market on a consistent basis, very difficult. And if you let your politics dictate your market outlook, it’s pretty much hopeless (the trap Krugman fell into the night of the election saying the market would ‘never’ recover from the initial sell off when it first appeared Trump would win, and what’s made him a less interesting voice in recent years generally).
This run up of 13 to 14% (cherrypicking the bottom of the four day drop right before the election, 11% using the numbers from the week before that, and also using the day immediately before election day) is in fact not at all unusual.
This has been an ongoing overall prolonged bull market since the low in March '09 with the S&P500 overall up about 245%, with some periods of being flat or dropping for a few months at a crack often followed by significant runs up.
One significant drop was from 11/15 to bottoming out in 2/16 after a rocky and volatile whole 2015. The S&P500 lost 12% of its value in about 3 months. Since then it went up 11.5% in 1 month (February into March), stayed flat a bit, went up another 7% in 1 month in July, stayed flat during election season, and then from that right before election drop started back up again, 5 to 6% in 1 month and, again that almost 14% in the total five months (again cherrypicking a low day and 11% using the day before the election and the weeks before).
Since that bottom in February there was the 5 months that followed that the S&P went up 16% and the 5 months since Trump won the election that it has gone up 11% (and sure almost 14% if you start from the brief drop the week before that it had already come back from by election day).
So let’s be very clear: the best one month and the best 5 months since we got out of rocky 2015 was not any month since or the five months since Trump’s election, but a period in which HRC was consider a heavy favorite to be the next president … not that I think that was causative either.
How about we look at other five month periods from Novembers since the recovery began. Maybe that can avoid the “convenient” charge of just comparing to other rallies. Sure we can skip 2009 as atypical as it was recovery year one.
2010 that 5 months November on saw the S&P500 up 14%
2011 up 21%
2012 up 17%
2013 up 3%
2014 and 2015 both essentially flat.
Hard to see 11%, even call it almost 14% using that transient drop as the low, as all that unusual. Oh fourth out of seven year on year five month samples (not even rally samples) is not bad, but “unusual”? … No, simply not the case.
Really.
(I welcome checking my math.)
And yes, down 2% over the past month. (Also not unusual.)
What dominates my outlook right now is uncertainty. Expecting a stimulus program from this Congress, for example, is optimistic IMO. I sold most of the stocks I had in January and even with the optimism shown now, I’ve no regrets because I feel like something is missing in the big picture, the part where “business is booming.” Is it really? I have doubts.
That’s the part that puzzles me. The increase in the index is pretty much a typical for a 5 month period of time but the best marker of how the market thinks of uncertainty is the volatility index - the VIX - and it is hovering near record lows.