Our favorite financial economist, Brian Wesbury, has some hopeful thoughts about the market following the election.
Since the presidential election, the S&P 500 is up 8.4%, the Russell 2000, a small cap stock index, is up almost 20% and the Dow is closing in on 20,000. Financial stocks have surged.
This “Trump Rally,” just like the entire 2009-2016 bull market – which pushed up stocks more than 200% – has its detractors. We heard it over and over in the past eight years, and now we are hearing it again – “the market has moved too far, too fast.”
Wesbury thinks that there’s a real reason for the market’s rise. “Hope and faith” has nothing to do with it. His model indicated that the market was undervalued before the election, and he has attributed that to government policies.
We believe the reason it was undervalued was because government policy was constantly making it more difficult for free markets to operate. Higher taxes, higher spending and more regulation increase the risks to future growth. It’s why we have had a Plow Horse economy. At the least, these policies are now stopped, at best, they will be reversed.
He expects that a Trump administration will be much more market friendly. At the current rate, perhaps he will soon begin talking about a “Race Horse” economy.
Of course, like any prediction about the future, events can get in the way. That’s why we are always cautious and focused on protecting our client’s investment assets while participating in the market’s advance within the constraints of prudence, knowing that our vision of the future is never guaranteed.
In the meantime, we are enjoying the ride and are getting ready for a very Merry Christmas.