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.