Trump isn’t killing the bull market. Here’s why

Trump meets with airline executives

A growing number of business leaders and Wall Street strategists are expressing concern about how protectionist policies and the unpredictable nature of President Donald Trump could affect markets and the economy.

But we all know that actions speak louder than words. What investors are actually doing is the exact opposite of what people are saying. The Dow, S&P 500 and Nasdaq hit all-time highs again on Friday.

And the Russell 2000, an index of small-company stocks that tend to do most of their business in the US, is now just a short distance from the all-time high hit last December amid a backdrop of Trump market euphoria.

More, VIX (VIX), a volatility gauge known as Wall Street’s fear gauge, is also down nearly 25% this year. If investors were really afraid of Trump, the VIX would be much higher.

And CNNMoney’s Fear & Greed Index, which looks at the VIX and six other measures of investor sentiment, is showing signs of Greed and not far from Extreme Greed.

Of course, Trump still can’t seem to stop himself from tweeting about things that, honestly, won’t do anything to help the economy – despite Nordstrom investors getting richer despite Trump’s attacks on them. for dumping Ivanka’s daughter’s trademark.

But to provide credit when it’s due, it seems the main reason stocks have rallied recently is because Trump has promised to announce a “phenomenal” tax plan soon.

Related: Rare record for US stocks: Lasts without 1% drop

Trump also pledged again to invest more in infrastructure when he meets with airline executives on Thursday.

That’s what the market wants to hear.

“We still expect fiscal stimulus, lower taxes and less regulation,” said Matt Lockridge, manager of the Westwood Small Cap Value Fund. “The timing is a big question, but it will come.”

Lockridge thinks many companies that generate most of their revenue from the US will benefit if Trump’s stimulus policy ends, boosting the economy more strongly.

He likes stocks in various industries, such as movie theater owners Masco (MAS)fast food company JJ (JJSF) and aerospace equipment company Kaman (KAMN).

Another money manager said he also remains optimistic that small US stocks could get a boost from Trump’s policies.

Related: Wall Street has a seat of power at Trump’s desk

Barry James, president and chief executive officer of James Investment Research, said he bought iShares Russell 2000 ETF (IWM) the day after the election because he believes Trump’s economic stimulus plan will spur growth for America’s small businesses.

“When Trump says America first, I really think that’s what he means,” James said, adding that he thinks the Internet phone service Vonage (VG)rental-to-own retailer Aaron’s (AAN) and discount chain Big number (BIG) all can thrive if Trump’s proposals are passed.

But there’s another reason the US markets are near all-time highs. Despite all the turmoil in Washington, the US is still seen as a model of relative stability compared to other parts of the world.

The European economy remains a big wild card thanks to Brexit, the rise of populism in France leading to worries about so-called Frexit and more worries about the issue that seems to never go away. foreign – the debt anxiety of Greece.

Japan’s economy remains stagnant. Now we are talking about more than a lost decade. It is plural. And China’s economy is also slowing.

Bond fund manager Bill Gross often jokes that America is like what Johnny Cash and Kris Kristofferson sang in “Sunday Morning Coming Down” – “the cleanest dirty shirt”.

Finally, analysts at bond ratings firm Fitch wrote in a report Friday that “elements on President Trump’s economic agenda will be positive for growth,” but said added that “the current balance of risks points towards a less benign global outcome.”

Of course, everything has two sides to that coin. Trump’s bomb blasts may come back to haunt him.

Related: Oreo Make Worried About Rising Populism

His continued rebuke of companies with which he disagrees on Twitter could undermine investor confidence.

And while his proposed travel ban on immigrants from seven predominantly Muslim countries has been overturned by the US court system, the president has vowed to fight for reinstatement.

Even if he loses that battle, it’s clear Trump is serious about looking more inward, with plans for tariffs and border-adjusted taxes that could spark a trade war with Mexico, China and the United States. Japan. That could hurt major US multinationals and lead to job cuts.

But investors still seem to believe/hope that the value of Trump’s pro-growth stimulus and tax cuts will outweigh the impact of isolationism. Let’s hope they’re right.

Investors may be covering their noses, eyes, and ears, stuffing cotton balls in their ears to drown the president. But they are still buying stocks.

CNNMoney (New York) Originally published February 10, 2017: 11:55 AM ET Trump isn’t killing the bull market. Here’s why

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