The stock market has been on a wild ride since Donald Trump won the presidential election. His promises of lower taxes and fewer regulations have investors feeling so positive about the future of the U.S. economy that the DOW is close to hitting a record breaking 20,000.
Will this trend up continue or are will it lose steam after the dust has settled and start sliding backwards?
Real estate is often affected by stock market performance. When investors are making money, they have the confidence to buy property. If they lose money, they don’t buy, or might even sell property.
Market Watch published an opinion piece recently saying that the recent enthusiasm over campaign promises like tax breaks and fewer regulations will peter out eventually – and that investors need to realize major changes don’t take place overnight.
The President-elect himself said that the stock market was in a bubble during his campaign. Yet the DOW has been up 8% percent since then and the NASDAQ up over 6%.
Some experts thought investors were just waiting until 2017 to sell stocks, in hopes of paying lower taxes on the gains – under a Trump administration.
Investors typically sell-off at the end of the year for tax purposes. But we didn’t get that sell-off this year wither.
Here we are now about two weeks into January and the rally still has legs. But some analysts say the indexes have hit all-time highs, and the rally may run out of steam once reality sets in. That reality being that stocks were already overvalued before the rally.
Mad Money’s Jim Cramer claims that charts based on the Fibonacci trading method indicate some kind of convergence that could trigger that reversal. Cramer says it’s contrary to what a lot of Wall Street technicians are seeing as “bullish” right now.
Cramer’s colleague Carolyn Boroden manages the website FibonacciQueen.com. CNBC writes that she spotted eight different Fibonacci time cycles in the Dow, and that seven of them will come due around the time of the inauguration. She says that that kind of a scenario indicates a market reversal about 65 to 70 percent of the time.
She says those time cycles can also cause an acceleration of stocks, and push the Dow higher. But she says it usually means the opposite.
Cramer says she doesn’t have any definitive answers about the end of the rally but sees the market “approaching an important decision point.”
There are also many stock market bulls who feel that the Trump victory euphoria will be short-lived. And that once the country wakes up to the reality of a new boss in the White House, the stock market balloon could pop.
Trump is not predictable and the stock market doesn’t like surprises. We’ve already seen what happens when Donald Trump tweets about a company. The stock or stock market sectors either rally or tank depending on what he says.
Fox Business writes: “In less than 140 characters, Donald Trump has brought billion-dollar businesses and CEOs to their knees.”
It’s not something the stock market, or the general public, is used to. Our incoming president is confronting major companies about their businesses strategies in a very public way.
So what have his tweets done so far?
It began in early December with a tweet about the cost of building a new Air Force One by Boeing. Trump tweeted: “Costs are out of control, more than $4 billion. Cancel Order!” Boeing stock dipped about 1% right after that tweet.
Trump also sent shares of Lockheed Martin down about 2% in a snit about the cost of military fighter jets. And the he challenged Boeing to make a fighter jet that’s cheaper.
There was also a tweet about General Motors and a $5 billion factory in Mexico for the Chevy Cruz. Mr. Trump threatened a big import tax on any cars brought back to the U.S. Shares slid about 1%.
When Ford announced that it would “not” build a new $1.6 billion dollar factory in Mexico but would instead use some of that money to expand operations in the U.S., Mr. Trump tweeted his kudos, and Ford stock went up about 1%.
Toyota got stomped in a tweet for plans to build a new factory in Baja, Mexico. And this is a foreign company, not a U.S. company that got blasted. But Toyota fought back with a clarification on the location of the factory.
The “Japanese” automaker said: “Toyota has been part of the cultural fabric in the U.S. for nearly 60 years. Production volume or employment in the U.S. will not decrease as a result of our new plant in Guanajuato, Mexico announced in April 2015. With more than $21.9 billion direct investment in the U.S., 10 manufacturing facilities, 1,500 dealerships and 136,000 employees, Toyota looks forward to collaborating with the Trump Administration to serve in the best interests of consumers and the automotive industry.”
(Guanajuato is in central Mexico, while Baja, Mexico is along the Pacific Coast.)
Fiat attempted to preempt any public flogging on twitter by announcing a $1 billion dollar plan for new auto plants in Ohio and Michigan and about 2000 new jobs. The stock jumped after Mr. Trump thanked Fiat in a tweet.
And then on January 11th, during a press conference, Mr. Trump didn’t need a tweet to move markets. He said that drug companies are “getting away with murder” in reference to high drug prices. That comment sent markets lower, especially drug stocks.
After that press conference, a Market Watch headline read: “How Trump’s Presser Threatened to Wreck His Own Stock-Market Rally”. The article points out that equities had been trading higher as investors anticipated more clarity from the President-elect, but those hopes were quickly dashed by the jab at pharmaceuticals.
Market Watch reports that Mr. Trump’s press session also sent the VIX 4% higher. The VIX is considered a Wall Street “fear gauge”. It did settle back down later in the day.
So it’s come to this. The stock market and the retirements of many many Americans has become dependent on a Twitter rant.
That’s why so many investors are putting their money into hard assets that are not as volatile. Find out where they’re investing by staying up to date with Real Wealth Network. Become a member today for free.
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