What some commentators are calling the “Trump Rally” in equity markets reached a psychologically important milestone today as the Dow Jones average hit 20,000 for the first time. The news is expected to create additional momentum in stock markets around the globe.
CNN, the news outlet Donald Trump loves to hate, greeted the 20K story with a story giving the new president credit for the equity boom:
The historic milestone leaves the Dow up a stunning 1,667 points since President Donald Trump’s victory in November. The achievement is evidence of how optimistic investors have become about the prospects for the U.S. economy.
“The stock market has given him this extraordinary vote of approval. Happy days are here again,” said Ed Yardeni, president of Yardeni Research.
What’s most fascinating about this is that early signs investors would be spooked by uncertainty surrounding Trump’s plans have clearly dissipated— even as political observers express continuing mystification at what the new administration and its congressional allies are going to do, and when they are going to do it.
It seems investors believe that whatever happens, it will be good for corporate bottom lines, at least in the short run.
To put it another way, greed is trumping fear, at the moment at least.
Interestingly enough, Goldman Sachs shares are among the biggest winners in the current rally. Is that because “happy days are here again” for the investor class generally, or for a firm that’s placing so many of its people in the new administration? That’s hard to say.
The bigger question is whether the stock-market rally means we are at the front end of a Trump boom that will do wonders for a sluggish economy and bring the kind of sustained growth that candidate Trump promised. It is far too early to predict that. If the chaos at the center of the Trump administration knocks its pro-corporate policies off track, or if trade wars —or actual shooting wars — break out, the Trump Rally in equity markets could easily become the Trump slump, with bulls giving way to bears.
But even those who think Trump will produce an ongoing nightmare in public policy with disastrous long-term consequences for the health and wealth of the American people and the sustainability of the planet must acknowledge he’s goosing the economy’s short-term prospects. You can get a lot of calories from chowing down on a nation’s seed corn.