Since the election, it’s been all aboard the Trump Train for global stock markets, with a multi-week continuous all-time-high rally.
Much to the surprise of virtually all the propaganda peddlers and “paid” market prognosticators, stocks did not crash when Donald Trump won, as most predicted.
So what now? And what to expect from here until the inauguration?
Since the election, the Dow has skyrocketed 7.8 percent, from 18,332 to 19,757.
What is it that drives the world’s largest and most liquid stock markets? It’s the pro-business stance of President-elect Trump.
Trump’s policy agenda is the most pro-growth we’ve seen in generations, and with a Senate and House of the same political party now, this deal will be far more likely to pass and be put into play.
Stocks love sustainable economic growth — and make no mistake, that’s the driver of this rally.
Bonds, on the other hand, are the opposite: They thrive on malaise and stagnation, hence the bond price plunge since the election.
Here are some things to be cognizant of:
The lowering of tax rates is expected to be passed by the president and Congress next year, and while that is a powerful positive for the economy and the markets in the long term, it may be ginning up this year-end rally as astute sellers hold off on cashing in until 2017 to save on their tax bills.
January in particular could see rounds of heavier-than-normal short-term selling, as it is believed any tax deal will be made retroactive to the first of the year.
Another risk to the rally is that the new administration and Congress fail to deliver on tax and regulatory reform in a meaningful way.
Other risks include a Federal Reserve that oversteps its bounds; less Fed interference equals more growth.
It seems clear to me that the US has entered a new bull market, based on expected economic growth. With the Dow closing in on 20,000, do you hold ’em or fold ’em?
Better to be a long-term investor than a market timer.