Much of the mainstream media predicted the election of Donald Trump as U.S. president would wreak havoc on the market.
Just take a look at what the Cassandras over at "The Atlantic" had to say about Trump’s victory back in October 2016 (https://www.theatlantic.com/business/archive/2016/10/donald-trump-business/505097):
"For a year and a half, Trump’s core claim to presidential competence has been his business record.
But his campaign has been disastrous for his business and nightmare-inducing for the global investor community.
Count it as one of the last historic accomplishments of a truly historic campaign:
Trump is so frightening he’s turned the global financial markets against a tax-cutting billionaire."
Not to be outdone, the doomsayers over at "Fast Company" made this gloomy prediction in November 2016 (https://www.fastcompany.com/3065393/election-2016/how-a-trump-presidency-would-ruin-the-long-term-future):
"If Trump were able to implement the economic policies that he wants—from tax cuts for the rich to booting out undocumented workers and adding tariffs on Chinese products—the economy would sink back into a recession."
Even top Republican donor Paul Singer got in on the act (http://www.politicususa.com/2016/06/29/major-republican-donor-warns-trump-global-depression-wins.html):
proclaiming a Trump presidency would trigger a “widespread global depression.”
Bill Gross, the so-called Bond King, said Trump's trade policies were "sure to short-circuit parts of the economy and the market, and that his spending and tax plans will create more debt that will hurt long-term growth for years to come."
A top Goldman Sachs strategist, Charles Himmelberg, predicted that "the S&P 500 will end next year at 2,200, 40 points below where it is now."
But the exact opposite happened:
- The large-cap S&P 500 is up almost 9% since November 4.
- And the small-cap Russell 2000 is up a staggering 19%.
- Check out the chart below...
The crazy thing is these moves happened in just over one month. In fact, it’s the biggest monthly return for the Russell 2000 since the Greek debt crisis in 2011.
Why is the “Trump Rally”?
It comes down to how investors value securities.
Trump campaigned on a promise to make America business-friendly again.
He pledged to reduce regulations, cut red tape… and, most importantly, cut taxes.
He wants to cut the corporate tax rate from 35% to 15%. And that’s good news for stocks.
Here’s why: the market is forward-looking...