Call it the "Trump Trade," the "Trump Bump," the "reflation allocation," or whatever you'd like, but since November 9th, it is safe to say that traders have been looking ahead to better days. And by now, everyone knows the bullet points of the bull argument which include lower taxes, less regulation, and better economic growth. According to our heroes in horns, all of the above are expected to result in higher profits for corporate America. Which, of course is expected to be a good thing for stock prices.
But if I've learned anything in my 30+ years as a money manager, it is that when a theme becomes too widely accepted - particularly when it comes to predicting the future of the stock market - things don't always go according to plan.
So, my thinking is that at some point, what I've been referring to as "economic reality" needs to actually materialize and morph into upside surprises during an earnings parade in the not-too distant future. As such, our furry friends in the bear camp are quick to remind us that the bulls could be at risk if there are any hiccups or false starts along the way.
I will opine that this concern is at least partially responsible for the current sideways action taking place in the major indices. Well, outside the NASDAQ, which seems to be marching to the beat of a different drummer lately, that is.
So, is it over? Has the "Trump Bump" run its course? Will traders now wait for policies to be announced? Or will the animal spirits take over soon and allow the bulls to continue their recent run for roses?
While pondering these and other questions, I decided to take a look at what the historical cycles might have to ...