The optimism surrounding a Trump economy can lead to consumers ramping up their spending, corporations finally putting their trillions of cash to work, and Americans willing to take the risk to start their own business-all of which should benefit the economy greatly. And it seems as if investors are also optimistic on the future as stocks are at or near record highs.
However, President Trump does not have an easy path ahead of him to try and get his agenda moved through Congress. It appears that there are many in Washington on both sides of the isle who are â€śglobalistsâ€ť where an â€śAmerica Firstâ€ť policy does not fit in their plans. These politicians are not going to relinquish their grip on power so easily so you have a President that is besieged by not only the Democrats, but also those within his own party. This explains much of the day-to-day chaos that has gripped Washington and the unsubstantiated reports that utilize â€śunnamedâ€ť or â€śanonymousâ€ť sources that try to pass as real journalism. In the meantime, I expect that Trump will continue to push through his agenda with the tax cut being the issue that I am most focused on right now. Historically, tax cuts have acted as an economic stimulus, which in turn, could bode well for the stock market. So naturally I would like to see a big tax package that lowers the tax rates not only for individuals, but also for corporations, passed by September which would be retroactive to January 1st of this year.
Although the U.S. markets are trading near record highs, we recently saw that any possibility of Trump not achieving his goals could send stock values declining. This was evidenced when the ridiculous impeachment talk intensified in early May, which then led to a sell-off in the equity markets. It is important to remember that the equity market appears to be pricing in Trump getting his agenda through, and if Trumpâ€™s agenda is delayed or diminished, there is a real chance that stock values will adjust to the downside. However, I still think that those politicians who are most vulnerable in 2018 will eventually come to the table ready to deal and eventually Trump gets his agenda through by the end of the year, which could provide added optimism for the stock market. In the meantime, the current bull market that began the day after the election looks to have legs. I am seeing that the rally is not based on the backs of a few stocks, but rather it is more broad-based across many industries, which is extremely encouraging.
I continue to think bond values will remain in a trading range until there is clarity on whether Trump can get the economy jumpstarted again, and we have seen this recently as bond values have actually seen less volatility and have risen slightly since the Fed last raised rates. However, I am planning on interest rates trending higher over the next 5 years, at least, as the Fed tries to unwind the artificially low rates that were the result of the Great Recession. I suspect that over the next two years, the bond market will offer me the most challenge in managing my clientâ€™s assets, but I do have experience negotiating the choppy waters of the debt world, as this is not the first time there have been rising interest rates since I have been a financial adviser.
Just a Thought
â€śThe world would never amount to a hill of beans if people didnâ€™t use their imaginations to think of the impossible.â€ť
-Pete Seeger, folksinger
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