The clock's ticking on Donald Trump’s first 100 days in office and if the post-election stock market rally is to continue, the nation’s 45th president must now make good on promises to enact policies that will make it easier for U.S. companies to profit and prosper and American workers to better share in the prosperity, investors say.
“He has to start delivering,” says Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research. “How much time the market will give him amid the high expectations, I don’t know.”
The 6.2% gain the Standard & Poor’s 500 stock index posted from Election Day to Trump’s inauguration Friday – the 4th-best rally for a president-elect – was driven largely by speculation that Trump’s promise to slash the federal tax rate for U.S. companies and push for deregulation will boost corporate profitability. Trump’s plans to spend heavily to upgrade the nation’s infrastructure and to incent U.S. manufacturers to make more goods domestically are also seen as benefiting the economy and workers by creating more jobs.
On Monday, Trump kicked off his first full week in power by meeting with top CEOs at the White House, reiterating his “America First” business-focused blueprint and sending a clear message that boosting the U.S. economy is a top priority. Trump said “we want to start making our products here again,” and that companies that invest in the USA rather than lay off workers and build factories abroad would reap “advantages” from his administration. However, U.S. companies that move factories abroad will be hit with a border tax when they import the goods back to the U.S., Trump warned.
Trump said he plans to “cut taxes massively” for corporations and the middle class, and pare back business regulations “by 75% and maybe more,” adding that the regulation of businesses has “gotten out of control.”
But when it comes to the stock market, which is moving into more of a “show-me” mode, Trump’s promises of things to come carries less weight now than things actually getting done – and in a timely manner.
With the stock market expensive relative to earnings and Trump’s potential business-friendly policies already baked into prices, investors have become more skeptical as to how much of Trump's agenda will come to fruition. Those concerns are reflected in the stalling out of the “Trump Rally.” The S&P 500 has slipped roughly 1% since its Jan. 6 record close and has posted losses the past two weeks. The index fell 0.3% Monday despite Trump’s latest promises.
The "hope" trade has given way to Wall Street making investment decisions based on reality.
“The market got ahead of itself with all the Trump euphoria,” says Jerry Braakman, chief investment officer at First America Trust. “A little bit of realism is setting in.”
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