Published September 8, 2017
Continuing a long-term rally that started in July 2009, equity markets have powered upward. The Dow Jones, S&P and NASDAQ trade near all-time highs. The recovery has been slow, but showed strength in the face of adversity several times, in particular getting wind under its wings with the surprise victory of Donald Trump as president. During his campaign, Trump made many promises, among them repealing and replacing the Affordable Care Act, tax reform and reduction of taxes, less regulation and repatriation of money held overseas. The market liked what it heard and began a powerful addendum to the existing rally.
At the same time, the global economy was recovering, which further added to the strength of the U.S. rally. But then the failure of the Republicans to pass a health care bill caused some observers to question the ability of Republicans to pass their other legislative goals, and doubts about Trump’s leadership skills set in. While optimism waned a bit, the economy powered on. The markets took strength from increasing corporate profits – 11 percent greater year over year through the second quarter of 2017.
The market worried that exogenous events might upset the trend. For instance, North Korea’s frequent missile lofts were a worry. In a period of 24 hours, North Korea sent a missile over Japanese territory and a powerful hurricane struck Texas with untold damage. At the opening of the market on that day, the Dow was down 150 points, but settled the day up 50. So powerful has been the recovery that not even two calamities in one day could derail it.
The hurricane was a gift to President Trump; it provided […]