On President Trump

I get asked all the time how the market can continue to trade higher in the face of what to many is an incompetent President.  Today I'm going to try and answer that.  First off let me get a few things out there.  I don't do politics on this blog.  There are plenty of other places you can go to get that sort of fix.  If I discuss anything political here it is solely in trying to get you to understand how events in the political sphere bleed over into the economic environment.  A growing economy, and the resultant growth in corporate earnings is what ultimately grows stock prices.  I also don't believe Americans are as divided as those on the extreme right and left would have you believe.  Unfortunately though, they're usually the ones with the media soapbox.  We're a country of over 330 million people, living in multiple regions and coming from many different backgrounds.  There will always be somebody or some event that fits into the expectancy bias of the most vocal voices on both the right and the left.  For the most part though, the rest of us have opinions and believes that somewhat occupy the center.  With that being said here's my take on the President.

The markets have been going up this year on an elixir that includes an improving global economy, growing employment, an attack on government regulation and the possibility of tax cuts.   Of these four things, the seeds for the first two were planted early in the Obama Administration and have begun to bloom for the past few years.  It is a measure of how badly the last economic depression stung us that it took so many years to climb out of it's depths.  President Trump can really take no credit for those even though he will.  The attempt to rollback regulation and the now real possibility of tax reform are things that are happening on his watch.  However, they also represent standard Republican beliefs on taxes and the role of government.  Tax reform in particular is largely happening on Capital Hill.  Of these four then the President can really only take credit for the rollback of certain regulations.  So what's changed?

In my opinion, what's changed for many investors is that the shackles of government are being loosed from business.  Note I said loosened and not removed.  The reaction to the Great Recession was perhaps an overreach on many businesses, particularly those like housing and the financial industry that may have played a large role in bringing it about.  I think there is now an attempt to get rid of the regulations that make no sense, while keeping the ones that have been shown to work.  I think all that plus a growing economy sends a signal that it's ok to make money again.  You won't be demonized by those in power if you do.  I think on top of all other things the markets like that.  You may not like that answer and I'm not trying to convert you if you don't care for what you just read.  I'm trying to tell you what I see.  Money goes where it's treated best and right now a large beneficiary of that is the stock market.

You of course will hear none of this from the American news media.  They hate Mr. Trump with a passion reserved previously only for Richard Nixon.  There's not one thing he has done or plans to do that receives anything but a chorus of boos from everybody out there but Fox News.  It's understandable.  They backed the wrong horse in the last election and now stand with a torn up winner's bet.  But, in doing so, they've shredded for the most part any mantle of impartiality they may at one point have held.  I say this again not to be on a soap box but as a way of trying to explain why stocks have ignored most of the negative news out of Washington.  If things continue to get better then stock prices have the potential over the next few years of moving higher as well.  That's because things will continue to get better.  I say this again without trying to preach or step on anybody's political views.   I care about any of this in the context of managing money how the political realm might impact my client's accounts.  I say don't get blinded by the rhetoric out of Washington.  Follow the money.  So far this year it's voted for stocks.