Trump isn’t killing the bull market. Here’s why

Trump meets with airline execs

Increasingly enterprise leaders and Wall Avenue strategists are expressing their worries about what President Donald Trump’s protectionist insurance policies and unpredictable nature would possibly do to the markets and financial system.

However everyone knows that motion speaks louder than phrases. What traders are literally doing is in stark distinction to what individuals are saying. The Dow, S&P 500 and Nasdaq hit all-time highs once more on Friday.

And the Russell 2000, an index of small firm shares that are inclined to do most of their enterprise within the U.S., is now only a few factors away from the all-time excessive it hit final December within the wake of Trump market euphoria.

What’s extra, the VIX (VIX), a measure of volatility referred to as Wall Avenue’s concern gauge, is down almost 25% this 12 months as nicely. If traders had been actually afraid of Trump, the VIX needs to be a lot larger.

And CNNMoney’s own Fear & Greed Index, which seems to be on the VIX and 6 different measures of investor sentiment, is exhibiting indicators of Greed and isn’t removed from Excessive Greed ranges.

After all, Trump nonetheless can not seem to assist himself from tweeting about issues that, let’s be trustworthy, will not do something to assist the financial system — though Nordstrom traders are richer regardless of Trump attacking them for dumping his daughter Ivanka’s model.

However to present credit score the place it is due, it seems to be like the principle cause that shares have taken off once more currently is as a result of Trump has promised to unveil a “phenomenal” tax plan quickly.

Related: Rare streak for U.S. stocks: Long stretch without a 1% dive

Trump additionally pledged once more to speculate extra on infrastructure when he met with airline CEOs on Thursday.

That is what the market desires to listen to.

“We nonetheless anticipate fiscal stimulus, decrease taxes and fewer regulation,” mentioned Matt Lockridge, supervisor of the Westwood Small Cap Worth Fund. “The timing is the massive query, however it’s coming.”

Lockridge thinks that many corporations that generate a majority of their revenues from America ought to profit if Trump stimulus winds up kicking the financial system into a better gear.

He likes shares in a wide range of industries, corresponding to movie show proprietor Masco (MAS), snack meals agency J & J (JJSF) and aerospace tools firm Kaman (KAMN).

One other cash supervisor mentioned he is additionally nonetheless bullish on small U.S. shares that would get a carry from Trump insurance policies.

Related: Wall Street has powerful seat at Trump’s table

Barry James, president and CEO of James Funding Analysis, mentioned he purchased the iShares Russell 2000 ETF (IWM) the day after the election as a result of he is assured Trump’s stimulus plan will increase development for U.S small companies.

“When Trump mentioned America first, I actually suppose that is what he means,” James mentioned, including that he thinks Web telephone service Vonage (VG), rent-to-own retailer Aaron’s (AAN) and low cost chain Huge Heaps (BIG) may all thrive if Trump’s proposals undergo.

However there’s another excuse why the U.S. markets are close to all-time highs. Regardless of all the uncertainty in Washington, the U.S. remains to be considered as a paragon of relative stability in comparison with different components of the world.

Europe’s financial system remains to be a giant wild card due to Brexit, the rise of populism in France resulting in worries a couple of so-called Frexit and extra worries about the issue that by no means appears to go away — Greece’s debt woes.

Japan’s financial system stays stagnant as nicely. We’re speaking about greater than only a misplaced decade now. It is plural. And China’s financial system is slowing down too.

Bond fund supervisor Invoice Gross has usually joked that America is like what Johnny Money and Kris Kristofferson sang about in “Sunday Morning Coming Down” — the “cleanest soiled shirt.”

To that finish, analysts at bond ranking agency Fitch wrote in a report Friday that “components of President Trump’s financial agenda can be constructive for development,” however added that “the current steadiness of dangers factors towards a much less benign international consequence.”

After all, there are two sides to that coin. Trump’s bombast may come again to hang-out him.

Related: Oreo make is worried about rise of populism

His continued penchant for reprimanding corporations that he disagrees with on Twitter may dent investor confidence.

And whereas his proposed journey ban on immigrants from seven principally Muslim international locations has been overturned by the U.S. court docket system for now, the president has vowed to struggle for its reinstatement.

Even when he loses that battle, it is nonetheless clear that Trump is severe on turning extra inward, with plans for tariffs and border-adjusted taxes that would ignite commerce wars with Mexico, China and Japan. That would harm huge U.S. multinational companies and result in job cuts.

However traders nonetheless appear to imagine/hope that the deserves of Trump’s pro-growth stimulus plans and tax cuts will outweigh the influence of isolationism. Let’s hope they’re proper.

Buyers could also be holding their noses, closing their eyes and stuffing cotton of their ears to drown out the president. However they’re nonetheless shopping for shares.

CNNMoney (New York) First revealed February 10, 2017: 11:55 AM ET

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