Wall Street didn’t miss what our market clearly failed to see following Donald Trump’s address to Congress, with the Dow up over 300 points smashing through the 21,000 level for the first time, when I bounded out of bed earlier this morning.
The local assessment yesterday afternoon was that his speech was short on detail and I do have to accept that there was a 20-point spike between 2pm and 4pm but the positivity was nothing like the reaction in US stock markets.
US stock markets were up over 1.5% at 6am this morning and European markets joined the party, with the French CAC up 2.1%, the German DAX 1.97% higher and the Pom’s FTSE spiking 1.64%!
In Europe, the Trump talk added to good economic data and earnings revelations, which looks like the best trifecta of news for stock markets.
So why have other markets reacted more positively to the Trump talk?
Well, they had more time to digest and analyse what they heard and one surprise was the idea that the private sector would be given an opportunity to be involved in the infrastructure spend, which not only creates opportunities for US listed companies, it also reduces the fiscal impact on the US Budget Deficit of more spending.
References to greater defence spending, tax cuts for the middle class, a deregulation taskforce to look at many areas where government meddles plus the magnitude of the planned infrastructure outlays have all helped to excite Wall Street.
Interestingly, following some economic data, which didn’t look all that bad, the first quarter economic growth number was downgraded by some economists and this could be telling the market that maybe this could slow down the Fed interest rate rises. This could help stocks as well but this is pure speculation.
On the other hand, CNBC reported: “Also lifting March rate hike expectations were remarks from New York Fed President William Dudley, who told CNN International on Tuesday that he sees a rate hike in the ‘relatively near future,’ adding that the case for tighter monetary policy has become more compelling.”
My take on the President’s unusual State of the Union address (that some say didn’t address the state of the Union) was that it was short on detail but turbo-charged the hope factor that he has brought to the table.
And because he’s an entrepreneur, he can talk to a market and knows what might excite it because he has been on the other side of a TV screen when others have done such an address.
He has also listened to former US presidents, continually asking: “What’s this guy doing for me?”
On Wall Street’s reaction, the answer he gave to others who run businesses and invest in those businesses looks like — plenty!
Of course, I can’t let my love for higher stock markets cloud my judgment so I have to warn that if Mr Trump fails big time to deliver in a sufficient timeframe, stock prices will fall.
I hope it doesn’t come to that.
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