After posting 9 straight lows in a row, and the market bottoming on election night, concerns have faded away in the rear view mirror as Trump drove the stock market to hit lifetime highs on November 21st. Three main things are happening that few people are talking about in what is affectionately being called “Trump Effect” by many experts. Either way, most people out there are on pace to beat their average 401k returns this year.
But what are these magical forces?
Let’s break them down one-by-one.
1. The Possibility Of A Stimulus To Help Lift Manufacturing
In the weeks leading up to the election, people were confused and concerned. Investors had no idea what to think. Now, however, with Trump at the helm and a the Republican lead house and Senate as his right and left hand men, the general consensus is that things are looking up for American manufacturing. The business community as a whole is feeling good about the possibility of a stimulus package focused on manufacturing to help struggling companies like Caterpillar and US Steel.
Such a stimulus would not only help those companies but benefit the many other industries closely tied to manufacturing. Investors are seeing this as an opportunity to buy before the stimulus is announced and enacted.
2. Infrastructure Funding Possible Boost For Economy
How many times did Trump say the airports in the US are like a third world country during the campaign? That’s rhetorical; obviously nobody can count that high. Regardless, that’s definitely something he focused on and is passionate about. He can’t land the Trump Force 1 in any old run-down airport.
Airports, bridges, buildings, highways, and a whole host of other items are on his fixer-upper list. This will require money, but more importantly it will require businesses in the private sector to get involved. That is good for the economy, which in turn is good for business again.
The economy is going to improve with someone at the top who is a successful business owner if not for any other reason than he sees the world through business-colored glasses. Business, and investors, like that. It’s not rocket science.
3. Deregulation, Including Obamacare, Has Businesses Optimistic
Perhaps Trump’s second favorite topic on the stump was repealing and replacing Obamacare. Whether or not that will be as easy as he initially thought it would be, it is certainly the direction he is headed. Whether it’s repealed, modified, added to, or modified in any other way, a safe bet is that it will be more business friendly. That compared with some of the talk of financial reform and going after the EPA and IRS has Corporate America excited about the options.
After all, American’s don’t necessarily like uncertainty. Election nights are always volatile events where nobody knows what is going on but, usually, calmer heads prevail. Usually.
After the 2012 election of President Obama, however, the stock market went into a tailspin. Here’s a fun fact from MarketWatch.com.
Dow Jones’s data team says the average change on the day after Election Day is negative 0.9%, with the top 5 declines arriving in the wake victories by Democratic presidents.
4. The Trade War With China And Mexico
A fourth, perhaps less important, reason for this increase in prosperity is the promise of an end to countries like China and Mexico taking advantage of the US. This would greatly increase the value of American-made products like an old fashioned Winchester safe or a set of craftsman tools.
I think we’ll find, going forward, that Trump will be very good for the people holding a lot of stock.