A growing number of business leaders and Wall Street strategists are expressing concerns about the impact that President Donald Trump’s protectionist policies and unpredictable nature could have on markets and the economy.
But we all know that actions speak louder than words. Investors are actually doing the exact opposite of what people are saying. The Dow Jones, S&P 500 and Nasdaq hit new all-time highs again on Friday.
The Russell 2000, a measure of stocks of small companies that do business primarily in the United States, is now just a few points away from its all-time high reached last December amid Trump market mania.
More importantly, Volatility Index (VIX) （Volatility Index (VIX)）A measure of volatility, known as Wall Street’s fear index, has also fallen nearly 25% this year. If investors were truly afraid of Trump, the VIX would be higher.
CNNMoney’s own Fear & Greed Index, which looks at the VIX and six other measures of investor sentiment, shows signs of greed and isn’t far off extreme greed levels.
Of course, Trump still can’t seem to control himself from tweeting things that, honestly, don’t help the economy at all — even as Trump accuses Nordstrom’s investors of abandoning his daughter Ivanka’s brand, they’re getting richer.
But to the stock market’s credit, the main reason for its recent resurgence appears to be Trump’s promise to soon unveil a “phenomenal” tax plan.
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Trump also reiterated his commitment to greater infrastructure investment during a meeting with airline CEOs on Thursday.
This is exactly what the market wants to hear.
“We’re still looking for fiscal stimulus, tax cuts and deregulation,” said Matt Lockridge, manager of the Westwood Small Cap Value Fund. “The timing is a big question, but it’s coming.”
Lockridge believes that if Trump’s stimulus plan ends up pushing the economy into higher gear, many companies that derive the majority of their revenue from the United States will benefit.
He likes stocks in a variety of industries, such as movie theater owners. male （but）snack food company Johnson & Johnson （Japanese JSF） and Aerospace Equipment Corporation Carman （Cam）.
Another fund manager said he remained bullish on U.S. small-cap stocks that could be boosted by Trump’s policies.
Related: Wall Street has a big seat at Trump’s negotiating table
Barry James, president and CEO of James Investment Research, said he bought iShares Russell 2000 ETF （Internet Wealth Management） Because he believes Trump’s stimulus plan will promote the growth of small businesses in the United States.
“When Trump says America first, I really think that’s what he means,” James said, adding that he believes Internet phone service Warnatch （Virginia）rent-to-own retailers Aaron’s （exist） and discount chains Large quantities （Big） If Trump’s proposal goes through, all of this will flourish.
But there’s another reason U.S. stocks are near all-time highs. Despite all the uncertainty in Washington, the U.S. is still seen as a model of relative stability compared to the rest of the world.
The European economy remains a huge uncertainty due to Brexit, the rise of populism in France raising concerns about a so-called “French Brexit” and concerns about a problem that never seems to go away: the Greek debt crisis.
The Japanese economy is also stagnating. We are not just talking about a lost decade now. It’s multiple. The Chinese economy is also slowing down.
Bond fund manager Bill Gross often jokes that America is like what Johnny Cash and Kris Kristofferson sang on “Sunday Morning Coming Down” — “the cleanest dirty shirt.”
To that end, analysts at bond ratings firm Fitch wrote in a note Friday that “some elements of President Trump’s economic agenda would be supportive of growth,” but added that “the current balance of risks suggests a less positive outcome for the global economy.”
Of course, there are two sides to every coin. Trump’s bombast could get him into trouble.
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His continued penchant for taking to Twitter to berate companies that disagree with him could undermine investor confidence.
Although his proposed travel ban on immigrants from seven Muslim countries has now been overturned by the U.S. judicial system, the president has vowed to fight to reinstate it.
Even if Trump loses this fight, he is still serious about turning his focus inward and planning tariffs and border taxes that could spark trade wars with Mexico, China and Japan. This could hurt large American multinational companies and lead to layoffs.
But investors still seem to believe/hope that the benefits of Trump’s pro-growth stimulus and tax cuts will outweigh the effects of isolationism. Hopefully they are right.
Investors may be holding their noses, closing their eyes and stuffing cotton balls in their ears to try to drown out the president’s rhetoric, but they’re still buying stocks.
CNNMoney (New York) First published on February 10, 2017: 11:55 AM EST
