
I also need to ignore the emotion of the political arena, not allowing it to color my thought process on investing. This was clearly a problem for many investors after the election of President Obama in 2008. The fear that he would not have the experience, intellect or chops to deal with the financial crises kept many investors away from the market then and for many years after, even though (in hindsight) a great secular bull market began just weeks after his inauguration … a bull that has seen all the major stock indices eclipse their former all-time highs.
My knee-jerk reaction, late election night November 8, was to assume that a Trump victory would be a bad thing for the market because it would create uncertainty (“Ladies and Gentlemen, We have a Black Swan”). We did not know which or how many of the things he had promised he might actually try to do; but, Trump the candidate appeared erratic and unpredictable. I believed uncertainty about the candidate would create market weakness. Was I ever Wrong!
Au contraire mes amis
It did create weakness early Wednesday morning, about two hour’s worth, down no more than about 250 Dow points before it turned and roared upward, finishing the week at a new all-time high for the Dow. Clearly the market participants have taken the president elect at his word on promises, believing that certain of his economic proposals are going to happen — tax reform, corporate repatriation of $2+ trillion in cash held overseas (taxed at very modest rate), major infrastructure spending, decreased regulatory burden (no more Dodd-Frank) and an end to the Affordable Care Act. The street seems not to believe that trade barriers will be erected. Oh yes, and all of the bad things that might happen had Mrs. Clinton been elected would be avoided (pharma took off, as did financials). The way the market acted last week all of this appears to be a fait accompli (not).
Of course, no one really knows how all of this will evolve in that great sausage factory known as Washington D.C. However, we might just be getting a glimmer from from Seeking Alpha quoting a Wall Street Journal article on bank regulation (Trump team tempers expectation on Dodd-Frank) or this item from The New York Times, “Donald Tump Says He May Keep Parts of Obama Health Care Act.” Here’s one more from Sunday’s New York Times that might help explain last week’s rally: “Calamity to Charm: Trump Rally Explained.”
Finally, for those of you fretting about the impact of Federal Reserve rate increases (a subject we’ve dealt with many times in this Blog), the yield on the ten-year U.S. Treasury note ballooned 32 basis points last week (up 17.6%) closing at 2.138%. The low was 1.37% and was hit after the Brexit vote, just four months ago. Last week the Dow Jones Industrials had their best week since 2011. Obviously, the market believes Mr. Trump equals accelerating growth for the U.S. economy and growth trumps higher rates.
Whether or not the acceleration comes at the pace forecasted by the Trump people, I am not going to argue with the market, nor am I going to let my political biases get in the way of making money.
What is your take?
The information presented in kortsessions.com represents my own opinions and does not contain recommendations for any particular investment or securities. I may, from time to time, mention certain securities for illustrative purpose, names where I personally hold positions. These are not meant to be construed as recommendations to BUY or SELL. All investments and strategies should be undertaken only after careful consideration of suitability based on the risks, tolerance for risk and personal financial situation.
Hello Bill,
If I remember well, George Washington died after his doctor had drained too much blood. His health was not improving, so more blood had to be drained. Modern medicine, if anything, brings new blood on board. Increase in taxation would not encourage the international business to bring the trillions back to the US. So, maybe Prince Charming has a good idea to attract the return of the capital by lowering taxes.
Please, opine.
Regards,
Voyteck
Voyteck, As we have seen in the petrie jar known as Kansas, eliminating taxes on the so-called job creators LLCs (my daughter-in-law, a physician operating as an LLC & my licensed massage therapist for the past 30 years also and LLC) hasn’t seemed to pan out. The aforementioned women feel guilty about paying no Kansas income tax while many who can least afford it do {a couple of wage earners, Joint fillers, netting $80,000 will pay about $2500 in Ks state income tax (+$14000 in fed income tax + $700 or $800 in payroll taxes)}. My two exemplars have not hired anyone lately and have not recently gone on any spending splurges. Ergo, that money is not going back into the Kansas economy.
There are many people in Kansas that are victims of automation, globalization — the have-nots of the technology revolution (typical Trump and Brownback voters). They need the relief, not my daughter-in-law. Smart tax reform would help the least of us, encourage repatriation foreign earnings at very favorable rates as well as encourage investment. It would not give relief to those of us who don’t need it and did not ask for it (i.e. the Kansas approach). I know this smacks of redistribution of wealth. I believe it to be basic fairness … you know that old saying, ‘to those whom much has been given, much is to be expected.’ I’m sure in may cases a lot of hard work and sacrifice was involved their success, but it is bigger than that. We all may be equal in the eyes of God. But we are not all blessed with equal intellect, opportunity or DNA. I would love to be a scratch golfer. I worked very hard in my youth to improve. It is not going to happen. There you have it. I have opined.
BTW, before his untimely demise he warned us about the real danger of hyper-partisanship. As I pointed out in this post was spot on. The US has become his worst nightmare! It is amazing that our national intellect has decline so much in the last 220 years.
Thank you Bill – spot on!!!