Fading Optimism on Wall Street
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Why have U.S. stocks fallen for two consecutive weeks?
This is Your Money Matters from The Wall Street Journal. Welcome to Your Money Matters. I'm Charlie Turner in New York. U.S. stocks have now finished lower for two consecutive weeks. Each week included one session with a big sell-off. The pullbacks are a sign that investor optimism is flagging. The Wall Street Journal says that while it's too early to call an end to the eight-year bull market, the optimism that defined the post-election rally is evaporating.
Is the post‑election 'Trump rally' losing momentum?
Here to talk about this is Wall Street Journal reporter Michael Wursthorn. So, Michael, are we finally at the stage where the Trump rally has run out of gas?
Well, so investors are a little split on whether or not this might be the end of the rally. But there's one thing for certain across the opinions of investors, strategists, analysts and others. And that's that we're facing a period where there's waning enthusiasm for the first time. You know, during this eight month presidency so far, as investors look at a number of obstacles that's facing this administration, that's facing a lot of his agenda, including tax reform and how that's going to get done. And it's starting to show up in these results. And we're seeing it, you know, perhaps a little more magnified as a lot of the bigger traders go on vacation, take some time off. And that leaves a lot of retail money left sort of trying to make sense of what this news might be.
Are there just no longer any reasons or any real reasons to buy stocks since the post-election exuberance has gone and also the earnings season has pretty much gone as well?
Yeah, I mean, a lot of folks have pointed to a lot of the gains this year to the incredible earnings of U.S. companies as well as those abroad. We just finished a great earnings session. There were some mixed results toward the end around some retailers, but overall it was a great earnings season. As we enter into the second half of the year, those forecasts for earnings are not going to be as strong. And that's another thing that investors are going to have to take into account as they're trying to figure out what to do with their money and how to play this market.
How are earnings and forward forecasts affecting investor enthusiasm?
You're going to have the continued uncertainty in Washington. A number of obstacles looming. That's just for the Trump administration and Congress to deal with. And on top of that, corporate earnings in the third quarter are not going to be as phenomenal as they were in the second. So we could certainly be looking at something that's a little more tepid for investors.
Have investors become pessimistic at this point that President Trump can enact any part of his legislative agenda? There seem to be too many distractions. The thing is, investors and other people have been counting on this agenda to be enacted to boost the economy and corporate earnings.
Yeah, and tax reform is probably one of the biggest pieces of that overall. We saw certainly after the election and earlier in President Trump's tenure when it was looking a little bit better for tax reform, you saw a lot of stocks, especially those in the financial sector, pick up massive gains. As the reality has set in, as we've moved along and tax reform looks harder and harder to certainly pull off this year, you're starting to see investors grow more concerned as to whether or not this agenda is is really going to be able to get done. And there's going to be a number of distractions that really then weigh on the administration that's further going to just make any movement on tax reform harder.
And among those is certainly the debt ceiling battle that's going to start in October. And of course, what the Fed's going to do. And that's just going to, you know, just make it a lot more wary for investors.
What do you think the Fed is going to do, and what does that signify? I mean, there have been forecasts that the Fed will raise interest rates one more time this year. But, you know, the economy is not really kicking into high gear at this point. Do you think they may adjust their forecast or just change their minds?
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Chapters
6 chapters
1
Why have U.S. stocks fallen for two consecutive weeks?
0:02–0:30
2
Is the post‑election 'Trump rally' losing momentum?
0:30–1:59
3
How are earnings and forward forecasts affecting investor enthusiasm?
1:59–3:39
4
Are investors losing faith that President Trump can pass tax reform?
3:39–5:06
5
What could the Federal Reserve’s moves mean for the market?
5:06–6:05
6
Which sectors have faded since the post‑election surge and why?
6:05–6:35
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