DJIA Posts Record High, S&P 500 +10% Since Trump’s Election

DJIA Posts Record High, S&P 500 +10% Since Trump’s Election

DJIA Posts Record High, S&P 500 +10% Since Trump’s Election

$DIA, $SPY, $QQQ, $VXX

Donald Trump’s Presidency unleashing the same investor enthusiasm that drove stocks to record marks during The Reagan Era

The S&P 500 stock index has risen about 10% since Donald Trump was elected President on a platform of cutting taxes and regulation, but that does not mean investors are showing excessive optimism.

After the Reagan tax cut of Y 1986, the S&P 500 rallied 40% in 9 months I was there and watched it happen.

Stocks also rebounded from the crash of 19 October 1987, when the DJIA fell 22.6% on “Black Monday” for the worst 1-day decline in history.

Though the saw the Fibo correction, S&P EPS did rise over 50% in 1988 after the plan was implemented.

Barcaly’s bank’s analysis of 10 drivers of stock values, including taxes, earnings growth, dividend payouts and volatility, shows that equities are not too expensive compared with historical averages.

The Barclays model shows the S&P 500 is valued at about 19.6X earnings, which is in line with the trailing 12-month mean of 19.4X.

“With potential EPS upside of 12 percent from a tax rate of 20 percent, the P/E would get a short-term boost, and our model suggests that the market would quickly price 85 percent-90 percent of the benefit,” Barclays said. “The negative effects of a border tax, if one is included, would likely see markets consolidate as EPS would not get much of a boost from the plan.”

The start to Y 2017 has been almost as good as the start to Y 2016 was bad.

It is an important distinction if only for the fact that “the turn” in the S&P 500 from its ugly start in Y 2016 started in mid-February when there were palpable concerns about how bad things looked for the stock market and the economy.

What a difference a year makes.

Today there is an almost prideful sense of how good things look for the stock market and how good they could look for the economy.

The major indices have all established new record highs, the cyclical sectors are leading the stock market higher, the financial sector occupies a leadership post, earnings are growing again, Crude Oil prices are up 80% from a year ago, and economic data is continually surprising on the upside.

The thinking among many market participants today is that the US economy is poised to achieve escape velocity, which is a far cry from the view a year ago when it was thought among many market participants that the US economy might slip into a recession and that falling Crude Oil and commodity prices might lead to a pernicious period of deflation.

Thursday, President Donald Trump sent a message by Twitter (NYSE:TWTR) saying stocks will keep rising from this week’s record levels.

Thursday, the US major stock market indexes finished at: DJIA +7.91 at 20619.77, NAS Comp -4.54 at 5814.92, S&P 500 -2.03at 2347.22

Volume: Trade came in on the NYSE at 997-M/shares + exchanging hands

  • NAS Comp +8.0% YTD
  • S&P 500 +4.8% YTD
  • DJIA +4.3% YTD
  • Russell 2000 +3.1% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.31) Neutral (0.19) Bullish (0.31) Bullish (0.42)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.34) Bullish (0.25) Bullish (0.48) Bullish (0.28)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Very Bullish (0.58) Very Bullish (0.54) Very Bullish (0.67) Very Bullish (0.54)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.32) Bearish (-0.36) Very Bearish (-0.57) Neutral (-0.03)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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