The political landscape is far more volatile than the stock market lately. Who would have expected that?
Although every day there seems to be a new development on the Trump/Russia collusion (“Witch Hunt” or “RussiaGate” depending on your perspective), markets continue to trend ever upward.
The Dow is up more than 16% and the S&P 500 is up 13% since Trump’s election in November.
So what gives? Three things.
- Trump is a genuinely new kind of president and we are all waiting to see where and how it goes.
- During Watergate, there were only four or five news outlets producing very little news. There were a couple fledgling “News radio” outlets, and a handful of credible influential guiding voices (a la Walter Conkite). Today, everything is breaking news, thousands of voices, the web, social media, endless vacuous commentary and no real authoritative guiding voices. There is no way anybody can figure out what is exactly happening.
- Whether intentional or not, Trump’s actions, apparent intentions and preliminary moves all seem to favor those who own stock. Shareholders have every reason to be comfortable and optimistic. There is a lot more independent as well as financial industry information available to shareholders today than there was in 1972-74. The resulting effect of this informational abundance could be less volatility as we adapt to the new normal of non-stop “breaking news”.
Investors have yet to take the looming prospect of impeachment of the U.S. President seriously.
Investor outlook and market optimism remain strong. Note the chart above mapping the trajectory of flagging bullishness over a 2 year period of time during the Watergate scandal which ended in Nixon’s resignation. The Trump roller coaster market has yet to appear. The market seems content to wait and see.
The long and short of it is that bull markets move at their own pace. Many investors, however, have been anticipating a change of tides for a while now and grow ever more skittish thinking a correction is imminent. It’s important to note that this is not an unusually long period of expansion if taken in a historical context. The average bull market duration since 1926 was 8.9 years and we’ll soon be 8.5 years into our current market expansion.
Given market fundamentals and the fact that Trump’s agenda for huge tax cuts and infrastructure spending are still very much alive, equities are still poised to be hot fun in the summertime. Investing, after all, is like sailing. When the wind is blowing, we better position the sail to catch that breeze.
The trending political drama, however, is testing everyone’s nerves, and so I suspect we’ll likely see a similarly jagged line if we chart bullish or bearish investor sentiment throughout the remainder of the Trump presidency. Stay tuned to me and your other favorite source of breaking news to grow and preserve your wealth effectively no matter what the headlines may bring.
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Suzanne Abrams, Registered Representative. Advisory services offered through United Advisors, LLC,
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