May 30, 2017
The Next 100 Days Could Mark a Return to Reality for the Financial Markets
With the "Honeymoon" Over, the Next 100 Days Could Mark a Return
to Reality for the Financial Markets
As expected, Trump fans and haters argued about the pros and cons
of his first 100 days in office, but there is little argument about
his impact on the stock market. The markets have hit new peak highs
several times since November 8 in a “honeymoon” rally based almost
entirely on optimism about Trump’s corporate-friendly economic
policies. Yet, apart from all the irrational exuberance on Wall
Street, Trump’s first 100 days were indeed a mixed bag worthy of
debate.
We saw signs that his ambitious economic agenda might succeed, but
just as many signs that it might stall, fizzle, or end up severely
watered down. Meanwhile, the markets remain inconsistent with
economic realities, and investors are waiting either nervously or
eagerly (depending on their perspective) to see what the next 100
days will bring. Will it be the validation of Wall Street’s
optimism? Or, will it be political gridlock, policy failures,
increasing global tensions, and a dramatic directional change for
the stock market?
Last month, Jeff discussed the fact that an increasing number
of analysts and economists are convinced that a major market
correction may be on the horizon despite whether Trump succeeds or
fails. I’ve also pointed out that even if that doesn’t happen, the
markets aren’t likely to climb much higher with Trump’s value
already priced into them based on optimism. In other words, even if
he manages to deliver on his promise of 4 percent GDP growth, that
should only allow actual corporate earnings to catch up with the
overvalued market.