Trump Rally Reversed: Forever?
The wise ones have declared the so-called Trump Rally" now has reversed:
First, stock prices falling a few percent is no big deal. Except for the extraordinary action since the November election, ups and downs are the norm. After all, our current bull market in stocks has suffered some harrowing drops, most recently in February of 2016, only to dust itself off and start all over again. It would seem we're just not used to this sort of action. Not only that, but with volume having dropped to recent lows, the very idea of anything volatile comes as a shock to the complacent system that has become our stock market. Indeed, the increase in volume when stocks fell on Wednesday wasn't even all that great - just greater than the recent somnambulant trading that's been the rule recently.
Second, as we implied last time, the idea that the stock market's current and future action is 100% tied into Trump effecting swift, radical changes that will super-charge the economy, thereby causing stock to dance and sing into the stratosphere, seemed a bit of a stretch from the beginning. Our first exposure to this starry-eyed view came during an Investment Committee meeting which happened to take place shortly after the November election. One of our esteemed members was certain that Trump's election would ignite a kind of New Age of economic growth. Naturally this would entail an aggressive allocation to stocks, which were sure to follow the coming prosperity into the new President's Promised Land like children following the legendary Pied Piper. May we suggest all of this sort of talk falls somewhere between "exaggeration" and "nonsense."
Even if Trump succeeds - eventually - in proposing and getting legislation passed that takes the handcuffs off the economy, it's going to take time. The economy isn't a machine with intertwined gears all hooked up to a switch that one only needs flip. It's made up of millions of participants, each of whom make decisions based on the complex set of factors that we human beings consider when we make all sorts of decisions.
None of this precludes the possibility of us all singing "Happy Days Are Here Again" one of these days. So if you want to practice your vocals now, go ahead. Just don't expect the cue to start singing to come in the coming weeks or months. It'll take some time if it comes at all.
Meanwhile, if you've forgotten that venerable good-time jingle, try this version on for size, replete with the smiling face of that good-time 'ol chum, FDR.
“There’s a lack of confidence in the reforms and the overall policy agenda, and that’s been spoken about underpinning the whole market sentiment and animal spirits so far,” Catherine Yeung, investment director at Fidelity International, said about investors’ reconsideration.No sooner did we post our comments about a weary stock market and it's relationship to "The Donald's" election rally than stocks dropped over (gasp!) 1 %, the first drop of such magnitude since last October. Can Armageddon be far away? A couple of comments:
First, stock prices falling a few percent is no big deal. Except for the extraordinary action since the November election, ups and downs are the norm. After all, our current bull market in stocks has suffered some harrowing drops, most recently in February of 2016, only to dust itself off and start all over again. It would seem we're just not used to this sort of action. Not only that, but with volume having dropped to recent lows, the very idea of anything volatile comes as a shock to the complacent system that has become our stock market. Indeed, the increase in volume when stocks fell on Wednesday wasn't even all that great - just greater than the recent somnambulant trading that's been the rule recently.
Second, as we implied last time, the idea that the stock market's current and future action is 100% tied into Trump effecting swift, radical changes that will super-charge the economy, thereby causing stock to dance and sing into the stratosphere, seemed a bit of a stretch from the beginning. Our first exposure to this starry-eyed view came during an Investment Committee meeting which happened to take place shortly after the November election. One of our esteemed members was certain that Trump's election would ignite a kind of New Age of economic growth. Naturally this would entail an aggressive allocation to stocks, which were sure to follow the coming prosperity into the new President's Promised Land like children following the legendary Pied Piper. May we suggest all of this sort of talk falls somewhere between "exaggeration" and "nonsense."
Even if Trump succeeds - eventually - in proposing and getting legislation passed that takes the handcuffs off the economy, it's going to take time. The economy isn't a machine with intertwined gears all hooked up to a switch that one only needs flip. It's made up of millions of participants, each of whom make decisions based on the complex set of factors that we human beings consider when we make all sorts of decisions.
None of this precludes the possibility of us all singing "Happy Days Are Here Again" one of these days. So if you want to practice your vocals now, go ahead. Just don't expect the cue to start singing to come in the coming weeks or months. It'll take some time if it comes at all.
Meanwhile, if you've forgotten that venerable good-time jingle, try this version on for size, replete with the smiling face of that good-time 'ol chum, FDR.
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