The election of Trump and the stock market: further and more specific results

by on February 14, 2017 at 11:51 am in Current Affairs, Data Source, Economics, Political Science | Permalink

There is a new NBER paper on this topic by Alexander Wagner, Richard J. Zeckhauser, and Alexandre Ziegler, here is the abstract:

The election of Donald J. Trump as the 45th President of the United States of America on 11/8/2016 came as a surprise. Markets responded swiftly and decisively. This note investigates both the initial stock market reaction to the election, and the longer-term reaction through the end of 2016. We find that the individual stock price reactions to the election – that is, the market’s vote – reflect investor expectations on economic growth, taxes, and trade policy. Heavy industry and banking were relative winners, whereas healthcare, medical equipment, pharmaceuticals, textiles, and apparel were among the relative losers. High-beta stocks and companies with a hitherto high tax burden benefited from the election. Although internationally-oriented companies may profit under some plans of the new administration, several other arguments suggest a more favorable climate for domestically-oriented companies. Investors have found the domestic-favoring arguments to be stronger. While investors incorporated the expected consequences of the election for US growth and tax policy into prices relatively quickly, it took them more time to digest the consequences of shifts in trade policy on firms’ prospects.

Having read through the paper, this does not to me look mainly like a shift from consumers (domestically-oriented and retail stocks are doing well enough).  It is closer to “companies overall benefit from greater wealth creation, though some will benefit considerably more than others, with some trade worries built in.”  The tax component is significant.

Again, the market is often wrong, but this is at the very least a…um…”public relations problem” for the Democrats.  The worse you think Trump is, the worse this problem becomes!

And please, don’t tell me on Twitter about the stock market not predicting your favorite catastrophe from history.  That point would not pass through an Intro to Stats course intact.

1 Rob February 14, 2017 at 12:01 pm

Other things than a higher stock market will matter to middle American more in the coming years. Very few members of Trump’s base actually will directly benefit from the higher prices. Most will lose out on healthcare, or will end up paying higher prices for cheap imports b/c of strong dollar and will lose out.

I’m not trusting any stock increases until Trump does anything concrete to affect the markets, until then this is all “animal spirits”.

2 msgkings February 14, 2017 at 12:02 pm

Or forward looking markets. Markets tank around 4-6 months BEFORE a typical recession, not during.

3 SPENCER February 14, 2017 at 3:58 pm

Recessions are generally preceded by higher rates and that is generally what tanks the market. If you are right on the direction of the market PE you will be right on the market some 80% of the time.

But the correlation between the change in earnings and the change in the market is essentially zero.

4 Doug February 14, 2017 at 12:15 pm

Stronger dollar lowers the cost of imports. Consumers will pay lower costs.

As for healthcare, evidence indicates that people consume far too much to have any benefit. See Oregon Medicaid study. Drastically cutting healthcare expenditures is one of the most sensible budgetary moves the Federal government can make. 95% of people would have higher utility from lower taxes and less medicine.

5 Rob February 14, 2017 at 12:40 pm

You’re absolutely correct on the stronger dollar, my mistake there.

6 mulp February 14, 2017 at 1:19 pm

I have evaluated the benefits of the Interstate system in 1960, and it had not had not cut transportation costs, cut congestion, or provided any increased mobility to the American people.

Isn’t that proof that the Interstate costs were just as wasted as expanded Medicaid in Oregon where they could continue to rely on EMTALA and bankruptcy and Federal hospital bailout payments just as the majority could continue to get around by passenger rail and living in congested cities and towns in small apartments and houses???

7 Dan Lavatan February 14, 2017 at 5:28 pm

That makes no sense. First of all, EMTALA is bad law. The Democrats admitted most people who have medical bankruptcies have insurance when they first get sick, I don’t think anyone on Medicaid has enough assets to even be forced into bankruptcy as there is no point trying to collect from someone with no assets. Medicaid and Medicare are Federal hospital bailout payments; the fed pays the majority of hospital costs and has for a long time – there are no supplemental payments for the minuscule amount of people who don’t pay. It could be said that the feds own all hospitals and just use them to transfer wealth to a few executives and major shareholders.

The Interstate system doesn’t really relieve congestion within a town, it is a way to move goods between towns and cities are still congested. We would probably be better off with more freight rail. However, in both cases the solution is the same – we can privatize healthcare and transportation by ending all subsidies and turning over assets and see what the markets tell us.

8 Jan February 15, 2017 at 5:18 am

The problem with cutting health care is that Medicare doesn’t really have a smart way to do it. Some health care is really important–like giving people statins or putting them on dialysis. But Medicare’s default is just to pay for anything. People fear rationing by bureaucrats, so they don’t allow Medicare to make many smart decisions about what we should and should not cover. Prices paid by Medicare are another problem. There is a committee made up by physicians–about 80 percent of them specialists–who decide what Medicare will pay for different services. Fox guarding henhouse.

9 Lord February 15, 2017 at 11:08 pm

Booms feel good until they end. This is a measure of the short term nature of markets. Opportunities are found in the swings.

10 msgkings February 14, 2017 at 12:01 pm

The last two presidents show why you can’t let your politics get in the way of your portfolio. For every righty who missed out on the Obama rally, there’s surely a lefty who will miss out on the Trump one. But if there’s a recession in 2019 Trump’s got a bear market on his hands.

11 Ray Lopez February 14, 2017 at 2:56 pm

Say what, food allergy LA hockey guy? Did you try and say something or just belch?

12 msgkings February 14, 2017 at 3:30 pm

Just belched.

13 nb February 14, 2017 at 7:33 pm

Exactly right.. I had fully expected the market to tank if Trump was elected, because of the sudden, unexpected reversal of prevailing globalist economic assumptions. Fortunately, I did not act on my sophisticated analysis. As of today Vanguard’s total market market index (VTI) is up 10.3% on November 8.

14 The Original D February 15, 2017 at 2:59 am

I sold all my stocks in January. Not because of Trump per se, but because the dollar is so strong that investing in S. American real estate is a bargain. I don’t think the dollar will remain this strong over the next four years, so in addition to real estate appreciation I’m also betting on currency-related gains.

I could be wrong, of course.

15 The Original D February 15, 2017 at 3:02 am

Oh and I bought more Bitcoin too.

16 Brian Donohue February 14, 2017 at 12:14 pm

People just fundamentally don’t understand what the stock market is.

Which is fine. It took me years to wrap my brain around it.

Anyway, the economy is a lot bigger than the government, thankfully.

17 msgkings February 14, 2017 at 12:51 pm

+1

18 Ray Lopez February 14, 2017 at 2:59 pm

The stock market is not a voting machine but a weighing machine. However, the period matters. As N=>infinity the prediction gets more accurate. By this measure, since we’ve had a bull market since 1980, the prediction is that neo-liberalism is working, notwithstanding the Great Stagnation.

19 msgkings February 14, 2017 at 3:31 pm

By your measurement we’ve had a bull market since 1930. In Realityville, we’ve had one since March 9, 2009

20 JWatts February 14, 2017 at 5:23 pm

Investing in stocks is good over the long haul. Modern society (1945+) is winning. It’s won in every decade since then. It won big in 1991. The world is getting wealthier and healthier and has been for a long time.

The Great Stagnation, is really a misnomer. It’s a slow down in the rater of getting wealthier, not a plateau nor a decline.

21 msgkings February 14, 2017 at 5:25 pm

THANK YOU. Yes, +100. For confirmation, read The Rational Optimist.

22 Gorobei February 14, 2017 at 8:48 pm

It’s actually debatable if N=>infinity causes stock market predictions to become more accurate. The weak law of large numbers doesn’t hold with fat-tailed distributions.

Of course, I’ve only worked on Wall St for 25 years and traded billions in equity stat-arb, so I could be wrong.

23 Cliff February 14, 2017 at 11:52 pm

“so I could be wrong”

I’m glad you’ve managed to stay humble with such an impressive resume

24 Ray Lopez February 15, 2017 at 1:05 am

Yes, true, but keep in mind a Mandelbrot-Cauchy distribution (fat tails) can be generalized to collapse to a standard normal distribution, if you tweak the parameters, as can Student’s T (as N –> infinity). Of course, I’ve never worked on Wall Street–I retired in my 40s–and am in the 1% from my family inheritance so I cannot be wrong.

25 Careless February 14, 2017 at 9:13 pm

Anyway, the economy is a lot bigger than the government, thankfully.

Well, it’s what, 2.5 times bigger? Almost 40% of the economy is plenty big to throw weight around.

26 Hadur February 14, 2017 at 12:19 pm

Perhaps the government has less effect on the profitability of companies than the average person thinks. Or, more cynically, perhaps government instability or poor rule (if this is in fact the expected result of something like Brexit or Trump’s election) does not change the fact that the stock market is still the best place to put your money, the other alternatives being even worse.

27 Hadur February 14, 2017 at 12:20 pm

Please don’t leave Brexit out of this by the way. By the time of the November election, we were all supposed to be going to the voting cave with our spears in hand, thanks to Brexit destroying the modern global economy.

28 Zach February 14, 2017 at 12:27 pm

As best as they can be pieced together, likely changes coming from executive action and legislation seems pretty consistent with inflating another asset bubble… tax cuts and spending stimulus in a time of near full employment combined with reduced financial regulation… means lots of extra money floating around with nowhere useful to put it and fewer rules preventing people from using that opportunity to take collectively stupid actions.

The post-election stock market is pretty consistent with this; with pre-election volatility having been misattributed to the likelihood of a Trump victory … when it really signaled concern for a contested election.

29 Dan February 14, 2017 at 12:34 pm

I often think of what a world we would live in if everyone had passed two semesters of probability and stats.

30 Anon7 February 15, 2017 at 12:23 am

Probably only marginally better at best. I’m skeptical that most people would retain and be able to apply that knowledge.

31 Jonathan February 14, 2017 at 12:36 pm

“That point would not pass through an Intro to Stats course intact.”

Ah, the inverse correlation between snark and grounding in reality. That the stock market is not, in fact, an all-purpose forecasting tool for the realms Tyler has applied it to (Baltic stock markets doing fine, nothing will happen, QED) in order to argue on behalf of Trump is hardly a bold claim.

As for the “public relations problem,” Trump was PEOTUS for two months and has been POTUS for less than a month. Those who gloat with less than 1/48th of a President’s term complete should be well-prepared for the future.

32 Careless February 14, 2017 at 9:27 pm

There were people gloating over the 2 hour crash in the market January 10th. People say a lot of stuff on the internet.

33 whatsthat February 14, 2017 at 12:38 pm

“the longer-term reaction through the end of 2016.”

What was that quote about successful was the French revolution?

Where is the counterfactual?

And, here: http://www.economist.com/blogs/freeexchange/2008/11/do_the_markets_not_like_obama

“Mr Varian notes that when stock prices are low people feel poorer and vote for Democrats. That means when the president-elect enters office stock prices are depressed. During his term prices increase to their natural level and the market experiences higher returns.”

34 Devin Lavelle February 14, 2017 at 12:40 pm

Arguing the stock market has much of any correlation with the economic well-being of most Americans wouldn’t pass muster in your Intro to Stats course, either.

35 Ray Lopez February 14, 2017 at 3:02 pm

But it might pass muster in a Econ 101 class, as they teach a wealth effect. The wealth effect occurred during the early 00’s with people taking out HELOC loans due to rising house prices.

36 lolz February 14, 2017 at 4:25 pm

that worked out quite well for the american economy, huh?

37 meets February 14, 2017 at 12:41 pm

I feel the anti-Trumpers (and I didn’t vote for him) are going with the strategy of ignoring the stock market while amping up the rhetoric of how much of a disaster Trump is.

The cognitive dissonance can’t continue if we see another 15% rally.

Several options the left and anti-Trumpers can respond with:

1) the market rally isn’t good for workers
2) it’s a bubble
3) it’s just a one-time thing from lower taxes or repatriation
4) Trump is not so bad after all!

38 mavery February 14, 2017 at 1:10 pm

I mean, the Republicans lamented Obama as a disaster for 8 years, and the markets performed quite well. Depending on whether you want to go all the way back to 2007 to start, Obama saw the DOW grow between 50% and 200% during his time in office. That’s anywhere between a mild success and one of the best runs ever.

Point being, the that never stopped Republicans from claiming that his policies were destroying the country, and all they got for it was control of the White House (sorta), Congress, and state governments across the country.

39 meets February 14, 2017 at 1:14 pm

I didn’t think Obama was a disaster.

The Dems are as wrong now as the Republicans were then.

40 mavery February 14, 2017 at 2:40 pm

I was responding to, “The cognitive dissonance can’t continue” by hopefully illustrating that the cognitive dissonance had been maintained (albeit by a different group) for quite a while.

41 msgkings February 14, 2017 at 1:49 pm

Um, why would you go back to 2007 for Obama’s time in office? It’s not 50%, it’s 200%, one of the best runs ever. Presidents don’t really have control over how the market does during their term, but Obama and Clinton proved that Democratic presidents are at least no hindrance to a good stock market.

42 Turkey Vulture February 14, 2017 at 2:29 pm

As you say, it’s a ridiculous exercise anyway, but if we are going to play the game it doesn’t make much sense to just look at the dates a President was in office. The market should be incorporating probability-weighted assessments of policies and events under potential Presidents long before they even win election. And it should be incorporating expectations that some portion of their policies will survive their Presidency. So to the extent Presidents are adding to (or subtracting from) the but-for performance of the markets, this effect will exist both before and after their time in office.

There are also obviously economic shocks unrelated to the identity of the President. I didn’t like Bush, but I don’t think economic history would have been so different under Kerry, or under Obama if he had been the candidate and won in 2004 instead of 2008. So looking at 2007 instead of 2008 would be a way to try to factor out some of the “economic shock” effect.

Again, on the whole a pointless exercise. There is so much noise that I think the only reasonable President-related points that can be made from market movements are either (1) it doesn’t look like the market is pricing in the catastrophe that you claim to be imminent, so if you believe what you’re saying there is a lot of expected value available to you by putting your money where your mouth is, or (2) it doesn’t look like the market is pricing in the glorious economic expansion that you claim to be imminent, so if you believe what you’re saying, same thing.

43 The Original D February 15, 2017 at 3:05 am

In 2007 no one seriously thought Obama would become president, so I doubt the market was incorporating that possibility. It was starting to freak out about subprime lending though.

44 mavery February 14, 2017 at 2:43 pm

Going back to 2007 removes the impact of the great recession. Whether you think that should be relevant in evaluating the DOW’s performance during Obama’s term is up to you. (To me, both numbers are informative.)

None of that is to disagree with your or TV’s conviction that the President has substantially less impact on the stock market than he’s often given credit for. The OP in this thread was talking about the difference between rhetoric and reality and how people contending that Trump would be a disaster will have to reconcile that with the heretofore strong performance of the market. My point was that if history is a guide, people will not bother to reconcile the contradictory beliefs, using the example of Republican criticisms of Obama for illustration.

45 msgkings February 14, 2017 at 4:55 pm

Both numbers might be informative but the numbers from 2007-2008 have even less to do with Obama than the numbers after 2008. As in nothing at all.

46 Andre February 14, 2017 at 12:42 pm

I don’t think this is a problem for Dems at all yet. Why would slightly more deportations or brown people stopped at the border hurt the market yet? A handful of dropped regulations should probably help. Fake hand waving about repealing ObamaCare might make things uncertain for insurers and hospital groups, but if it is all hot air then that should be temporary.

It won’t be until the massive tax cuts and corporate tax reform appear like they might actually happen that we should see some possible impact no? Trump’s incompetence (and I suspect later the House Freedom Caucus’s) is turning the administration into a big nothing burger.

47 mulp February 14, 2017 at 2:06 pm

Hown much benefit can tax cuts provide?

Corporate taxes have been cut so much that they are well under half the share of gdp when growth was consistently higher, “47%” of individuals pay no income tax, while in 1960, a full time minimum wage earner paid income taxes (and the real wage was higher than today), and tariffs and fees are lower leading to less spending because the individuals paying income taxes aren’t paying much more than they paid in the 60s when they invested far more in new productive capital to exploit tax loopholes and dodges.

Friedman argued that the tax code of the 60s resulted in workers being paid too much to build wasteful capital assets because the tax dodging turned a 90% tax on $10 into $10 of wages paid producing a capital gains of $6 after $10 of wasteful investment expense, that was taxed at 20% leading to a $5 after tax profit on $10 of bad investment and labor costs that pushed up all wages and food prices as low wage farm workers jumped into high wage construction.

The changes in tax code punish investment in new productive capital assets that drive down profits. At low tax rates, their are no huge tax avoidance to pay for building assets. Instead, the lightly taxed profits get slashed drastically. Look at the investment in oil priduction: once the prices fell, workers were quickly fired. In the 60s, oil production costs at the margin exceeded $3 a barrel, the market price, but investing 90% tax rate income in oil production LLCs created losses for five years when they were sold for $6 in capital gains for every $10 in money losing investment but after taxes, $5 more in after tax income than paying a 90% tax. These tax dodges kept US oil production increasing until changes in tax law killed off these tax dodges and US oil production started falling, even as the market price of oil increased rapidly.

So, tax cuts won’t do much to boost the economy, though Wall Street will likely find ways to create “profit” from less gdp minus government spending. As tax cuts will increase government spending as a share of gdp before the tax cuts drive cuts in investment and production to increase monopoly profit. And increasing profits is the goal of tax cuts on profits, not increasing investment and profit killing competition.

48 Hansjörg Walther February 14, 2017 at 12:43 pm

Where is the Trump rally? If you look at the S&P 500, it has been on a roll since early 2016. There was a slight dip before the election, and then it went on as before. If you ascribe the part since the election to Trump, how about the part before?

A different reading would be that things were already looking up, and Trump did not change that. With a surprise outcome, there was some reevaluation for different sectors around this general trend.

49 Cliff February 14, 2017 at 11:56 pm

Because Trump just popped into existence in November 2016?

50 Jon February 15, 2017 at 4:43 pm

Given that both poll-based models and betting markets gave Trump an extremely small chance of winning, the reality of him becoming president kind of did just “pop into existence” in November 2016.

51 BDK February 14, 2017 at 12:44 pm

Does the paper address the effect of the bond market sell-off on equities? Unfortunately I do not have access to the paper, but I imagine any discussion of market-wide movement in equities is incomplete without considering whether the massive yield spikes in fixed income are a cause, effect, or not directly related to the performance of equities (or some combination thereof). Obviously some people will speculate based on the believe that an administration is good or bad for a particular equity (or equities generally), but others simply have a bunch of money to put to work, and, as a general matter, you can park it in 1) cash, 2) fixed income, or 3) equities. If 1 and 2 become less attractive for reasons related to, among other things, expected inflation, you may choose 3 even if you are not sanguine on the economic outlook.

52 anon February 14, 2017 at 12:55 pm

Markets up today on news of Russian cruise missle deployment in violation of current treaties?

Markets are funny. And by that I mean markets are more self-concerned than many of us expected. They are less out there digesting news and cogitating new valuations.

53 Dick the Butcher February 14, 2017 at 1:02 pm

The smart money thinks the market is up because Paul Krugman said it would crash. I only read his stuff for the puerile prognostications. I do the opposite.

54 anon February 14, 2017 at 1:05 pm

Maybe the market, for one, welcomes the future Pence administration.

55 Dick the Butcher February 14, 2017 at 1:21 pm

Maybe the equities market welcomed the Trump victory and the signal change from a callow continuation of Obama policies which was promised by HRH Hillary.

56 anon February 14, 2017 at 1:35 pm

That’s the trick. Anyone can say anything for Mr. Market. He may be high because Trump will accomplish everything. He may be high because Trump will accomplish nothing. Or nothing more than Ryan’s agenda. Or Mr. Market may be riding momentum and knocking back shots.

Probably the only way to be really wrong is to claim Mr. Market definitely only believes one thing, and the state of the world can be back-calculated from that.

57 Brian Donohue February 14, 2017 at 1:53 pm

People who know what they don’t know generally refrain from this kind of storytelling.

Works for you though.

58 anon February 14, 2017 at 2:25 pm

Did you not understand? The Shiller Nobel is based on this. Any number of stories could be told about Mr. Market, and were. His Black Monday survey group had one set of stories that day. They had a different set a year later. And even better, they misremembered their day-of answers.

59 anon February 14, 2017 at 2:36 pm

Can’t open this myself right now, but fwiw

http://www.nber.org/papers/w2446.pdf

60 rayward February 14, 2017 at 1:11 pm

As Cowen correctly predicted in the years preceding the financial crisis, rising asset prices do not a stable and growing economy make. I agree with Cowen. Apart from Trump’s election, rising asset prices (not just the stock market but real estate too) give me groundhog day jitters. The difference between 2006-08 and today, is that essentially the same policies proposed to be adopted by Trump (tax cuts for the wealthy and for business, deregulation of industry including finance, etc.) were already in place. Yet, the outcome then was a catastrophe. Why will the outcome this time, with essentially the same policies, be different? Is it because Trump is a winner and Bush was a loser? Is it because this is the Year of the Rooster (in China, not that Trump struts like a rooster). Even if (and it’s a big if) Trump can avoid an international crisis of his making, can the economy ride the winds of rising asset prices? Here’s how I interpret Cowen’s optimism today: the policies proposed by Trump have yet to be adopted and might not be adopted. There’s always hope. And prayer.

61 CG February 14, 2017 at 1:44 pm

This does not appear to me to be a broader market trend in reaction to greater productivity or wealth creation, but rather industry specific reactions to anticipated policy changes, e.g. financials positive on the likely roll back of Dodd-Frank, industrials positive on infrastructure spending and environmental deregulation, retail negative on prospect of import taxes, pharmaceuticals negative on potential drug price controls (which Trump has openly supported), etc.

Also, as noted in today’s Daily Shot email (via Mats Glettenberg), the “correlations among various equity sectors keep falling…different industries represent either Trump-on (financials, etc.) or Trump-off (consumer staples, etc.) sentiment. These groups move in opposite directions, pushing correlations lower.” The chart (link below) shows correlations between sector ETFs and the S&P 500 have dropped to an all-time low. You probably wouldn’t see this steep decline in sector correlations if the market was reacting to an anticipated benefit of overall wealth creation.

https://twitter.com/MatsGlettenberg/status/831126027187400704

62 Axa February 14, 2017 at 2:00 pm

There are short, medium and long term consequences of presidential orders.

Trump relaxed the Dodd-Frank regulation and promised to lower taxes to business. In the short term this is incredibly good for business. 2017 profits are going to be great. In the medium term even if things starts to go wrong, consumption has momentum and business keep running fine. In the long term consumers get again buried by debt and the bubble deflates. But, I think that’s not happening soon. So, why not keep trading and making money before the bubble deflates? Student loans? 72 months car loans? What will go wrong the next time?

I’d say the market is pricing Trump effects for the following 2 quarters, at most whole 2017, no more. The market is not wrong, it’s simply that most trading is not based on long term expectations. And the few people that trade long term are sure their portfolio will go down in bearish times but will eventually recover and grow.

63 AlanG February 14, 2017 at 2:03 pm

A lot of this stuff is just nonsense and we are not going to know the full impact until tax reform is completed. Anyone who is make predictions in a the absence of that is a fool. It’s rather interesting that Goldman Sachs newsletters seem to be shifting their view every 2-3 weeks these days. Yes, some sectors are down yet there are stocks within those sectors that are smartly up (pharma stocks down, Merck up 11%). Those of us who are Graham & Dodd acolytes are not finding much joy these days given high valuations but if you have done your homework there is not a sense of absolute dread either.

64 Benny Lava February 14, 2017 at 2:20 pm

“Again, the market is often wrong, but this is at the very least a…um…”public relations problem” for the Democrats. ”

And Tyler goes full retard! Congrats. Any papers on how much the markets loved Obama and approved of Obamacare you’d like to share?

65 Turkey Vulture February 14, 2017 at 3:42 pm

The market point is a useful one as long as you’re rebutting either claims of coming catastrophe or coming utopia. If the market doesn’t seem to be factoring the catastrophe/utopia in, then anyone claiming its imminence should be investing according to their conscience with the expectations of significantly market-beating returns. Their failure to invest accordingly is a strong indicator that they don’t believe what they’re saying.

Once the market point becomes about attributing certain market movements between election and inauguration to the identity of a President, it approaches “useless” territory.

66 Vivian Darkbloom February 14, 2017 at 3:52 pm

Case in point, Paul Krugman, November 9, 2016 at 11:42 (on “his speciality”):

“It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?

Frankly, I find it hard to care much, even though this is my specialty. The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.”

Still, I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.”

https://www.nytimes.com/interactive/projects/cp/opinion/election-night-2016

But, OK, *after* the markets actually did recover, PK took that back. What other choice did he have?

67 Briefling February 14, 2017 at 4:07 pm

Tyler… did you manage to become a professional economist without realizing that sometimes a market rally is a sign of an *unhealthy* economy? (Of course sometimes it is a sign of health.)

On Trump himself I withhold judgment. I expect a certain amount of incompetence, but outright disaster would surprise me.

68 anon February 14, 2017 at 4:14 pm

Foreign Policy is remarkably harsh.

http://foreignpolicy.com/2017/02/14/the-fog-of-trump/

69 Dan Lavatan February 14, 2017 at 5:20 pm

I don’t use twitter and it is not even worth shorting. However, I want to clarify a few things as a person who adopted a bearish view. First of all, it has nothing to do with Trump, it is about valuations and the business cycle moving to late stage. This could lead to a slight decrease in the markets and not the double digit gains we require. The interest charged means we can’t short stocks directly. Rather we move to consumer staples while continuing arbitrage and will adopt some short positions in stocks (via options) that do poorly late cycle and under reflation that will occur when the dollar stabilizes.

We will continue to crush the 401kers and vixers as they deserve.

70 anonman February 14, 2017 at 5:28 pm

retail stocks are doing well enough

Really?

71 Joan February 14, 2017 at 5:36 pm

Goldman Sachs went up about 40% in the weeks after the election , does this mean that smart money thinks Trump is more corrupt than Hillary, All she did was talk to them, he is putting them in the government in charge of making policy

72 msgkings February 14, 2017 at 5:45 pm

That’s what makes that money smart.

73 byomtov February 14, 2017 at 9:13 pm

Again, the market is often wrong, but this is at the very least a…um…”public relations problem” for the Democrats.

Wrong about what? Suppose the market is correct that corporate profits are going to rise under Trump. That is a problem for the Democrats because….?

74 Methinks February 14, 2017 at 10:09 pm

(Serious) what exactly does Tyler mean when he states that the statement would not survive a stats course intact?

75 AntiSchiff February 14, 2017 at 10:42 pm

The so-called Trump boom is largely a myth, unworthy of a paper. By the end of December, the stock market was predicting a little over .3% additional NGDP growth max, with “nominal” being the key word. Some of that additional growth merely reflected rising inflation expectations, while a good part of the rest partly reflected lower ZLB-related risks and higher expected earnings for select stocks, as pointed out.

More broadly a large portion of infererior goods related stocks out-performed the indexes, and many luxury stocks under-performed. This is all consistent with a vastly overblown expected benefit of Trump to the broader economy through the end of last year.

76 AntiSchiff February 14, 2017 at 10:45 pm

I should have said the lower ZLB-related risks would be due to higher expected interest rates due to deficit spending. The Fed would offset inflation that averaged more than 2%.

77 Bill February 15, 2017 at 11:08 am

The stock market increase is

Positively correlated with

The Probability of

Trump’s Impeachment.

Check it out.

78 Jackson Layers February 17, 2017 at 9:13 am

It was indeed surprising, but still the happenings are even more surprising, it will be interesting to see how it all works out. I trade with very careful approach. It helps a lot with broker like OctaFX which covers me nicely having small spreads from 0.1 pips for all major pairs to zero balance protection, swap free account plus much more, it’s absolutely rocking and is one major reason why I feel so good with them and enjoy myself greatly.

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