POST-ELECTION TRUMP LOOKS A BIT DIFFERENT THAN PRE-ELECTION TRUMP.
Industrial and Defense Stocks have led the Market to new highs
as consumers and investors have embraced the post-election statements of Mr. Trump
optimistically.
Mr. Trump’s poise and dignity, that seemed lacking throughout
the campaign, has emerged, and as a result optimism as developed throughout
America and the world. Financial markets
have rallied globally. The Dow Jones
industrial average broke 19,000 for the first time and most industrial based
stock indices are at new highs. Contrarily
growth indices have encountered fear-based obstacles and have lagged the
industrial based leadership in the market. Since the election defense and
aerospace, heavy construction, and bank stocks have led the market and have advanced
double digits, despite virtually no confirmation from Wall Street analysts with
higher revisions to earnings for these groups.
Wall Street analysts are almost always late to the party and
their earnings expectations generally lag investor’s intuitive moves in the
market. These Intuitive forward-looking
investors unfortunately get things wrong more than right and one must wonder if
the current moves in these industrial groups is well thought out. Will Donald
Trump makes substantial investment in new weaponry for America despite America
being $17 trillion in debt? Will that
same debt prevent Mr. Trump from building the wall and rebuilding our
infrastructure? Investors sold bonds and
have driven up interest rates on US treasuries by three quarters of 1% since
the election on speculation that America will spend trillions over the next
four years on Mr. Trumps plans. These questions will remain unanswered for
months as we await announcements by the Trump administration and the opponents
of his agenda. In the meantime the markets will be volatile as the views of
intuitive investors settle.
In the meantime economic data continues to tilt up toward. Consumer
confidence continues to rise and retail sales and US consumption shows early
signs of accelerating. The nation’s
money supply (M2) has been growing above trend for several months and it is
highly likely this blip in growth will lead to acceleration in consumption for
the next six months or more. This will
be a welcome change to the stagnant growth we have had for the last few years. It
is not surprising that the market is moving higher given this improving
economic picture combined with a president-elect who now looks Presidential.
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