Wednesday, November 8th 2017 (WASHINGTON) – It has been one year since Donald Trump was elected president and one year since financial forecasters predicted doom and disaster on Wall Street. Rather than market armageddon, the stock market has been consistently breaking records for the past 12 months.
On Tuesday the Dow Jones closed at 23,557.23, marking the 74th time since the 2016 presidential election that the Dow has set a new record high. On Monday the NASDAQ topped 6,786.44, also a new, record-breaking high. The S&P 500 continued to edge up above 2,594 last week, also setting a new record.
Before jetting off on a 12-day visit to Asia, Donald Trump tweeted out a few of stats about the past year, making note of the “Highest stock Market, up $5.4 trill.”
The past 12 months have been a far cry from what some forecasters anticipated on the eve of the election last year.
At the time, Citigroup predicted a Trump win would cause the S&P 500 to immediately lose 3 to 5 percent. Since Trump’s victory, the S&P has gained approximately 20 percent. The Dow and NASDAQ have soared 30 percent.
“If Donald Trump wins the election, kiss your 401(k) goodbye.” That was the message from Bridgewater Associates, the world’s largest hedge fund, reported by Fortune Magazine. The fund warned of a 2,000 point plunge in the Dow in response to a Trump victory, a crash 1.5 times worse than the worst day of the 2008 financial meltdown.
As the final results came in on Election Night, global markets were shocked. The Dow futures market tumbled along with the benchmark indexes appearing to validate the doomsday predictions.
The fear was short-lived and in a matter of days, it was replaced with enthusiasm.
“I think the initial reaction for some portfolio managers, as seen by the stock market performance, was to sell,” said Dr. Vikram Mansharamani, an author and financial advisor. “But after investors began thinking about what a Trump victory meant (the promise of lower taxes, infrastructure spending, regulatory rollbacks, etc.), they grew less worried.”
A supportive monetary policy and strong corporate profits were also helpful, he added.
In the coming months, there were additional suggestions that the Trump rally was coming to an end. With each new record-setting close, another analyst warned that investors were gripped with complacency, the market was topping out and would soon come crashing down.
On the 30-year anniversary of Black Monday, some were warning of a repeat of the October 19, 1987 stock market crash saying the Trump rally could not continue. But it has.
At the end of October, Howard Gold, founder and editor of GoldenEgg Investing, noted that the 30th anniversary of Black Monday was met with “only shrugs from today’s investors.”
Instead, he wrote, “rock-bottom unemployment, GDP growth of around 3 percent for two consecutive quarters, coupled with the Federal Reserve’s determination to raise rates gradually have bolstered businesses’ and investors’ confidence.”
The question now is how long can this rally continue and what happens when it comes to an end?
To be sure, no one truly knows the answer to that question, and if they do, they will be very rich when the time comes.
Gold cited one financial cycle analyst who sees no end in sight. With the exception of some likely downward corrections, the expectation is for “the bull to keep running.”
Mansharamani, on the other hand, says he is “very concerned” about the current stock market, which has steamed ahead while brushing aside a growing list of serious risks.
Among the shocks the market could see is a tax reform failure, a new Federal Reserve chairman who decides the time has come to raise interest rates, “currency chaos” being driven by a very strong U.S. dollar, and, of course, geopolitical tensions that are “rising dramatically” with North Korea and new levels of uncertainty in Saudi Arabia.
Other analysts have warned that Donald Trump is sitting on the same “big, fat, ugly bubble” he denounced during his campaign.
John Hussman, president of Hussman Investment Trust who also predicted the 2008 crash, is now preparing for the “inevitable collapse of the current episode.”
Hussman argued that the U.S. equity market is “at the most offensive level of overvaluation in history, exceeding even the levels observed in 1929 and 2000.” But he is not predicting a massive correction anytime soon.
Generally positive economic indicators and the fact that other markets around the world are increasing in value and even outpacing the U.S., suggests the gains are at least partly on solid ground.
On his way to Japan on Monday, where the Nikkei has also been setting new records, Trump told reporters that his presidency was the driving force behind the numbers, stating simply, “The reason our stock market is so successful is because of me.”
It’s often a difficult claim for a president to make, but he insisted, “I’ve always been great with money, I’ve always been great with jobs, that’s what I do. And I’ve done it well.”
The current bull market began under Barack Obama and has been running strong for the past eight years. During the 2016 campaign, Trump snubbed Obama and Federal Reserve Chair Janet Yellen for employing low interest rates to prop up “the artificial stock market.”
According to a September CNBC poll of major company’s chief financial officers, an overwhelming majority of respondents, 77 percent, said Trump deserve some credit or most of the credit for the market gains.
Since taking office, Trump has largely lived up to the expectation that he would be “business friendly.”
Though the president and the Republican Congress were unable to pass health care reform, Trump has rolled back dozens of regulations. Leaders on Capitol Hill are now speeding toward a Christmas deadline to pass a $1.5 trillion package of tax cuts that includes generous benefits for the wealthy and corporations.
Investors have already cast their lots anticipating the passage of tax reform. Treasury Secretary and former hedge fund manager Steve Mnuchin reminded lawmakers of this fact, saying that a failure on tax reform could mean a reversal of the past year’s gains.
“To the extent we get the tax deal done, the stock market will go up higher,” Mnuchin recently told Politico. “But there’s no question in my mind that if we don’t get it done you’re going to see a reversal of a significant amount of these gains.”
