by Chris Isidore and Heather Long | February 8, 2017: 7:04 PM ET
Powerful voices on Wall Street are expressing concern that President Donald Trump isn’t going to be everything that investors had hoped for.
In recent days, three of the nation’s largest banks have issued reports that highlight the risks that come with a Trump presidency. They are warning investors to be careful.
U.S. stocks soared right after Trump’s election election because investors were eager for the corporate tax reform, regulatory relief and infrastructure spending he promised.
It’s worth noting at this point that the professional prognosticators were projecting declines for the stock market if Donald Trump won, compared with an even keel had Hillary Clinton been elected President. When it became obvious election evening that Mr Trump would win, Dow futures dropped 750 points. Yet, once the markets opened, stocks rallied, and gained strength quickly.
Instead, in his first few weeks of office, Trump has highlighted several controversial issues that businesses generally oppose, such as dropping out of trade deals and imposing new limits on immigration. And it may be hard to win approval for the parts of Trump’s agenda that Wall Street does like amid stark political polarization.
“The Trump Agenda presents risks in both directions; tax cuts and infrastructure funding could boost growth but could be offset by the negative effects of restrictions on trade and immigration,” said a note from Goldman Sach ()’s economists. “One month into the year, the balance of risks is somewhat less positive in our view.”
“The recent difficulty congressional Republicans have had in moving forward on Obamacare repeal does not bode well for reaching a quick agreement on tax reform or infrastructure funding, and reinforces our view that a fiscal boost, if it happens, is mostly a 2018 story,” it added.
Well, that’s what the prognosticators are saying, but that’s not what the markets have been doing. From The Wall Street Journal:
President Donald Trump said his goal of lowering taxes for businesses was moving ‘ahead of schedule’
By Riva Gold and Corrie Driebusch | Updated Feb. 10, 2017 4:23 p.m. ET
Major U.S. stock indexes ended the week at fresh records, buoyed by corporate earnings as well as the prospect of tax cuts and relaxed regulation.
Stocks have been rising since Mr. Trump’s election partly on expectations that his proposed tax cuts would energize the U.S. economy and lift corporate earnings.
Gains accelerated Thursday after Mr. Trump said his goal of lowering taxes for businesses was moving “ahead of schedule.” He plans to send Congress an outline for a tax-code overhaul for individuals and businesses by the end of the month.
The Dow Jones Industrial Average rose roughly 97 points, or 0.5%, to 20269. The S&P 500 climbed 0.4% and Nasdaq Composite added 0.3%. All three closed at records Friday and posted weekly gains.
“Politics is playing a much larger role in the day-to-day and week-to-week market than it ever has before,” said Brian Nick, chief investment strategist at TIAA Investments, an affiliate of Nuveen. “It’s not the euphoria we’ve had since the election, but until we have something happen to throw a wrench in the market in terms of fiscal policy, investors are optimistic about the future.”
The rally in stocks pushed Apple within a dollar of its record close of $133 this week. Apple shares slipped Friday but posted a weekly gain of 2.4%.
Bank stocks got a lift early Friday afternoon as the Federal Reserve announced that Daniel Tarullo, its regulatory point man who was appointed by President Barack Obama in 2009, will resign this spring.
There’s more at the original, but the point has been made: what the economic experts have predicted is not what has happened.
Eventually, the stock markets will have some declines; that always happens. But it seems that the people who are putting their money down have different opinions than do the professional economists.