Why We Shouldn't Call This Market Run-Up a 'Trump Rally'
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What is the main topic discussed in this episode?
This is Your Money Matters from The Wall Street Journal.
Welcome to Your Money Matters. I'm J.R. Whalen in New York. If the stock market continues to post record close after record close through early January, some might use the often used phrase Santa Claus rally. Others may simply call the steep market run up over the past 13 months the Trump rally. But is it fair to label the current rally after Donald Trump? Fisher Investments founder and chief investments officer Ken Fisher joins us to discuss what's really driving the market and how investors can strategically pick key sectors to invest their money. So, Ken, let's start with the market rally. Some would argue that the promise of corporate tax reform is the main source of fuel that is propelling this market.
But is there is there more to it?
Basically, my view has been since the rally started, which is really February 2016, that this is a falling uncertainty rally.
Is the current market rally accurately described as a 'Trump rally'?
It's all about the political uncertainty in America, which was huge then, declining through post-inaugural period as we formed a government and came to realize that that that government really couldn't do very much that some people hoped for and other people feared, and that the stabilization that comes from that realization is falling uncertainty. Well, meanwhile, the same thing's been going on, but with a time lag overseas, particularly in Europe, with so many elections this year, governments being formulated, they still don't have the government formed, for example, in Germany. It took longer to form a Dutch government than ever before. All of this has been a falling uncertainty global political rally.
But it's not specifically about Mr. Trump. I think we would have had the exact – I don't want to say the exact same numbers. That would clearly be wrong. But we would have had a falling uncertainty rally had Ms. Clinton been elected. She would have had to do much of the same thing. Pick cabinet members. Some don't get confirmed, particularly with the Republican Congress. Then go back and pick more. Finally, she's got the team in place. Then you see how they interact with Congress, what wins, what doesn't.
So you think the rally is a little bit more coincidental with Donald Trump being in office?
If you go back and you look at the 12 months after election, literally, for all of the presidents, this one has been one of the better ones, but it's far from the best. The best of all was Bill Clinton's second term. Nobody called out a Clinton rally. In 96. Nobody called Franklin Roosevelt in 1934 a Roosevelt rally. Nobody called Reagan a Reagan rally. And Reagan or Roosevelt rallies sound better poetically than does Trump rally. But be that as it may, nobody talked about the George Herbert Walker Bush rally, which was bigger than this one. The fact is, if it was really a Trump rally, U.S. should be doing better than foreign, whereas during this period, foreign's been doing better than the U.S. The same is true in a parallel sense about the tax cuts.
If this was really all about the tax cuts and how great Dow was going to be and some of the things you hear people say that I consider largely utter nonsense, like all the cash that's going to come back to America, theoretically, that should be bad for outside of America. And if that were the case, why has the non-U.S. market been doing better than the U.S. market?
So the House and Senate have agreed on a 21% corporate tax rate. So what you're saying is that you don't see that as having a significant impact going forward on the market?
Whenever you have something like that, you ask yourself a simple question. Have we had tax cuts and hikes in the past ever? And if so, how many, when, and what happened in the 3 and 12 months after that? In fact, whether it's corporate, personal, capital gains, you can measure them all up and you can't actually see a discernible bullish effect With any of them, what you can say about them is that when we've had these cuts before, what they've led to is a relatively tepid U.S.
How does Ken Fisher define the rally as a 'falling uncertainty' phenomenon?
market compared to foreign.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:02–1:02
2
Is the current market rally accurately described as a 'Trump rally'?
1:02–3:59
3
How does Ken Fisher define the rally as a 'falling uncertainty' phenomenon?
3:59–8:58
4
Would the market rally have occurred under a different president?
8:58–10:13
Speakers
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