President Donald Trump on Thursday hailed Wall Street’s continuing rally, tweeting out a celebratory message as the White House continues to be roiled by internal divisions and scandal. “Stock markets hit new high with longest winning streak in decades,” Trump tweeted. “Great level of confidence and optimism — even before tax plan roll out!”
Sent in the hours before stock markets opened on Thursday, the tweet followed the fifth straight all-time record finish for all three major stock indices, which have risen on hopes that Trump will soon release details of a new tax plan. Analysts say the recent gains could be vulnerable, with such details yet to emerge. “The most prominent train of thought right now is that the market is due for a pullback of some kind,” said Patrick O’Hare of Briefing.com.
Since Trump’s election, the blue-chip Dow Jones Industrial Average has skyrocketed 12 per cent — also boosted by generally solid economic data and corporate earnings. Major financials have outperformed the market, with Goldman Sachs, which has close ties to the new administration, adding nearly 40 percent since Trump’s shock election victory.
Wall Street was drifting lower in mid-morning trading today, threatening to end the winning streak, with S&P down 0.4 per cent by 1600 GMT. Trump returned to the subject later today, telling reporters that news media were ignoring Wall Street’s triumphs. “The fake news media doesn’t like talking about the economy,” he said. “I never see anything about the stock market sets new records every day.”
But on the campaign trail Trump took a different point of view, claiming that gains on Wall Street were illusory. “The only thing that looks good is the stock market but if you raise interest rates even a little bit that’s going to come crashing down,” Trump said during a September debate with Democrat Hillary Clinton. “We are in a big, fat ugly bubble.” While Trump seems to have changed his tune since taking the White House, embracing the Wall Street rally, some analysts say there are signs stocks could be overpriced. Steven Ricchiuto, chief US economist at Mizuho, said expected returns on stocks appeared to be “out of step with reality.”
“Equities can rise 10 per cent this year on continued share buybacks, dividend increases and improved expectation for 2018 but 20 per cent seems overly aggressive.” Joel Naroff of Naroff Economic Advisors said apparent disarray in the White House was a threat to Trump’s ability to deliver on the very things investors wanted.
“While the economy is in good shape, the administration is not. The chaos is raising questions about the ability to push through significant tax cuts and spending increases,” he said in a client note. Given the current climate, Republican lawmakers may balk at Trump plans for deficit spending, he added. “That would not be good news to all those investors who believe that happy days are here again.”