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Canuck_2
Senior Contributor

Where go the markets?

I was reading earlier about how the stock markets were already into an 'oversold' position before the election and this latest bump has increased that position and they are set up for a correction down in value.

Article said that the low interest rates attributed to the high value of stocks really has no correlation with past history of markets.

 

So now I came across this article wich points out things that could turn the market down.

How many of these risks do you think might happen?

I am old enough that my investments have been move to safe solid money markets so am just a spectator, no decisions to make.

 

http://money.cnn.com/2016/11/22/investing/trump-stock-market-rally-ignores-promises/index.html?iid=h...

 

Wall Street is in heaven these days. Donald Trump's surprise election has led to a rally, carrying the Dow above 19,000 for the first time ever.
The Trump rally has been sparked by hopes that the president-elect will follow through on promises to slash taxes, roll back regulation and ramp up infrastructure spending. Many are betting a focus on these strategies will finally unleash the American economy after years of sluggish growth.
But lost in the post-election euphoria is the fact that this rally has been almost exclusively built on Trump's pro-business campaign promises -- not the ones that frighten many investors.

2 Replies
BA Deere
Honored Advisor

Re: Where go the markets?

Well I'm an economic gloom and doomer, always have there's just too much debt. Trump has the right answers and it seems like those that matter will support him. He is similar to Reagan, but Reagan started with a debt/GDP of 35% and ended at 55% of GDP. Trump doesn't have that luxury of deficit spending as debt/GDP is 105%...we've just squandered too many years of doing nothing.

Confidence and optimism run the economy, so perhaps we can skate on thin ice another 4 or 8 years....I'm holding my breath.
hardnox
Advisor

Re: Where go the markets?

Since he's already backing down on a lot of what he promised, let's assume that he really isn't going to do a lot of the crazy stuff.

 

But we're well past the average post-war recovery length and global growth is slowing. His only real shot is a big fiscal push.

 

-high end tax cuts have a low multiplier effect and are particularly unlikely to trickle down when we have excess capacity and low aggregate demand. They just produce big deficits.

 

-as spending goes, arms spending is also so-so, but it is politically acceptable to the GOP

 

-he may be able to get the GOP caucus to sign on to an infrastructure plan if they phony it up as just guarantees to private outfits- really the same thing but they can claim it is budget neutral, In fact they can claim it is budget positive with some dynamic scoring. But my guess is it will just be a Cash for Clunkers deal- they'll ditch other projects and go where the free welfare money is.

 

So I'm not optimistic but doesn't mean we won't stay hopey changey for a while.

 

A thought- if I was a billionaire with a lot of unrealized CGs on financial assets, I'd hope the market would go up into year end so I could cash out at lower tax rates next year.